Maintaining the uptrend in remittance
Thursday, 18 December 2008
The remittance sent by the growing number of Bangladeshi workers has proved to be one of the two main pillars on which the country's macro economic stability is so much dependent. The highest ever recorded flow of remittance in fiscal year 2007-8 helped the economy; this period also witnessed the greatest number of Bangladeshis going abroad with jobs in a single year. This contribution no doubt was a very strong factor in keeping the country's macro economy unaffected by severe stresses when its import costs of essential goods such as for food and fuel climbed to unprecedented high levels in international markets.
Now, the global economic crisis is indirectly threatening Bangladeshi export commodities over the medium and longer terms. It is feared that as recession deepens in the developed and rich countries and consumers there lose purchasing power, the same would have an adverse impact on Bangladeshi products exported to those countries. Similar worries are there about falling remittances from such countries as well as shrinking demand for workers. The biggest employers of Bangladeshi workers such as Saudi Arabia and other countries in the Middle East are also expected to squeeze their development activities in the face of the falling income from lower prices of fuel oil. Thus, requirements of foreign workers in these countries could decline affecting remittance inflows. So far in the first quarter of the present fiscal year, workers' overseas jobs and the sending of remittances shows a continuation of the previous favourable uptrend. This is no doubt helping the macro economy. However, it is of crucial significance to at least maintain the current level of remittance to hedge the economy. Keeping the growth of remittance on the higher side should be the longer term objective.
There are opportunities for remittance growth even without further rapid increases in the number of workers going abroad with jobs. It can happen only from ensuring that the remittances reach the country through the approved legitimate or official channels of banks and financial institutions. In that case, the remitted amounts can be added to the country's foreign currency reserve. According to a report published in this paper, some 40 per cent of the total remittances are sent through the clandestine unofficial or 'hundi' system from which the country's economy is not benefited. For example, Bangladeshi officially received US$ 7.91 billion in fiscal year 2007-8. But an amount of $3.2 billion were sent through the hundi system in that period. Thus, the net of official remittance received by the country could be US$ 11.11 billion, a far higher amount than the one actually received if only all remittances could be received through the legitimate channels.
Therefore, instant results can be obtained from creating conditions that would make it more and more attractive for the remitters to remit through the official channels. The banks and money changers need to be persuaded to take the steps to ensure the fastest and effective dispatch of the remitted money. The speed of the hundi operators in this regard presently gives them an edge over the official mediums in some cases. When the overseas workers will find out that their remitted amounts can reach their intended beneficiaries quicker through the official channels than through the hundi operators, then their attraction for the official channels would surely improve. The opting for the official channels will also increase from a reduction of service charges now taken by the banks and money changers. In sum, the banks and authorized money changers will have to be more competitive than the hundi operators in terms of both time and cost.
Now, the global economic crisis is indirectly threatening Bangladeshi export commodities over the medium and longer terms. It is feared that as recession deepens in the developed and rich countries and consumers there lose purchasing power, the same would have an adverse impact on Bangladeshi products exported to those countries. Similar worries are there about falling remittances from such countries as well as shrinking demand for workers. The biggest employers of Bangladeshi workers such as Saudi Arabia and other countries in the Middle East are also expected to squeeze their development activities in the face of the falling income from lower prices of fuel oil. Thus, requirements of foreign workers in these countries could decline affecting remittance inflows. So far in the first quarter of the present fiscal year, workers' overseas jobs and the sending of remittances shows a continuation of the previous favourable uptrend. This is no doubt helping the macro economy. However, it is of crucial significance to at least maintain the current level of remittance to hedge the economy. Keeping the growth of remittance on the higher side should be the longer term objective.
There are opportunities for remittance growth even without further rapid increases in the number of workers going abroad with jobs. It can happen only from ensuring that the remittances reach the country through the approved legitimate or official channels of banks and financial institutions. In that case, the remitted amounts can be added to the country's foreign currency reserve. According to a report published in this paper, some 40 per cent of the total remittances are sent through the clandestine unofficial or 'hundi' system from which the country's economy is not benefited. For example, Bangladeshi officially received US$ 7.91 billion in fiscal year 2007-8. But an amount of $3.2 billion were sent through the hundi system in that period. Thus, the net of official remittance received by the country could be US$ 11.11 billion, a far higher amount than the one actually received if only all remittances could be received through the legitimate channels.
Therefore, instant results can be obtained from creating conditions that would make it more and more attractive for the remitters to remit through the official channels. The banks and money changers need to be persuaded to take the steps to ensure the fastest and effective dispatch of the remitted money. The speed of the hundi operators in this regard presently gives them an edge over the official mediums in some cases. When the overseas workers will find out that their remitted amounts can reach their intended beneficiaries quicker through the official channels than through the hundi operators, then their attraction for the official channels would surely improve. The opting for the official channels will also increase from a reduction of service charges now taken by the banks and money changers. In sum, the banks and authorized money changers will have to be more competitive than the hundi operators in terms of both time and cost.