Remittance is flowing but can it face headwinds?

As in past years, there are good tidings about remittance payments made by Bangladeshi overseas workers before the next Eid ul Azha. According to newspaper reports quoting Bangladesh Bank source, in seventeen days, from May 1 to 17 this year, the amount remitted stood at $ 2.18 billion or $130 million daily. This is unprecedented and marks a 35 per cent increase over the corresponding period during last year. If the present trend is maintained, the total amount remitted by the end of this year may exceed $33.0 billion dollars, it is estimated by Bangladesh Bank. The amount remitted during the previous month (April) amounted to $ 3.75 billion, which is the highest for a month recorded so far. The amount remitted in April this year recorded an amount higher by $700 million than the previous month of March which indicated that there has been an uptake in remittance independent of exigencies of religious festivals. This is bourne out by the amounts remitted in February ($350 million), January ($360 million) and December last year ($370 million). All told, during the 10 months and 17 days period of the current fiscal (2025-2026) a total of $31.51 billions have been received as remittance. This is 25 per cent higher than the remittance in the corresponding period during 2024-2025 fiscal, according to Bangladesh Bank sources.. The total amount received during the 10 months 17 days period during last fiscal was $ 26.14 billion.
As a result of record remittance the foreign exchange reserve has markedly increased. Till May 14, foreign exchange reserves stood at $ 34.31 billion, which converted into IMF's BPM-6 amounted to $29.65 billion. The increase in the volume of remittance has been assisted by the cash incentives given by the government to remitters of foreign exchange using official channel eschewing hundi. In addition, the policy of buying foreign exchange from commercial banks to maintain a rate of exchange higher than the curb market has been successful in encouraging wage earners abroad to use official channel. Meanwhile, open market operation by Bangladesh Bank has soaked up surplus dollars from the market which would otherwise have dampened the exchange rate. So far, an amount of $5.88 billion has been purchased by Bangladesh Bank from commercial banks this fiscal.
The 20.3 per cent increase in remittance during the current fiscal upto May 17 has improved the balance of payments (BOP) in current account. According to Bangladesh Bank source quoted by a Bengali daily (Amader Somoy, May 19), the balance of payment has a surplus of $3.66 billion dollars covering the first nine months of the current fiscal. In contrast to this fiscal's BOP position, the same during the last fiscal (2024-2025) was a deficit of $1.10 billion. The $ 4.42 billion in excess of last fiscal's remittance upto May 17 has made the difference in the BOP position this fiscal. Increase in remittance during the current fiscal has compensated for decline in export earnings leading to current account deficit. Decrease in exports and export earnings have been exacerbated by increases in volume of imports involving more payments than earnings through exports. During the current fiscal up to the month of May, export earnings amounted to $32.38 billion compared to $ 33.87 billion last fiscal. There has been a decrease in exports by 4.4 per cent this fiscal so far. The negative growth in export earnings has been compensated by increase in remittance, leading to the built up of a comfortable foreign exchange reserve.
Accompanying the improvement in the BOP, there has been an improvement in the Financial Accounts of the government. Against a deficit of $570 million in Financial Accounts during the first nine months last fiscal, the amount for the same period this year has gone up, amounting to $3.81 billion. The good news about remittance up to May 17 this fiscal is overshadowed by ominous developments looming overhead. Bangladesh has about five million workers in the Gulf region engaged in unskilled and semi- skilled works in construction, transport, hospitality sectors, domestic services, cleaning and low-end retailing. The current armed conflict in the Middle-East threatens to bring these jobs to shrink or complete stoppage.
The magnitude of this employment crisis for overseas workers can be analysed under three scenarios. Under the first scenario the current war is expected to be over in 2 to 4 months causing mild disruptions in economic activities. This will see job losses or non-renewal of contracts. Under the the second scenario, the war will continue for 6 months. This scenario will produce: (a) Fewer new visas, (b).Contract non-renewals and (c) Slowdown in construction activities. Overseas workers likely to be laid off have been estimated at 2 to 4 lakhs. The third scenario envisages medium-scale disruptions in economic activities spanning a period of 6 to 12 months. During this period 5 to 10 lakhs of overseas workers will lose their jobs including (a) layoffs, (b) unpaid leaves, (c) forced return migration to home countries and (d) major reduction in recruitments. A report prepared by ILO has noted labour demand in Gulf countries is already falling sharply.
Under the fourth scenario, named 'Severe Disruptions', there will be closure of Hormuz Strait for over one year causing recession in the economies of the Gulf countries. This will adversely impact the jobs of 1.5 to 2 million workers following : (a) stoppage of large cinstruction projects, (b) collapse in tourism and hospitality services, (c) suspension of major projects and (d) forced return migration of a large number of workers to their countries.
The above analytical framework has been prepared to cover the Gulf countries but can be applied to Saudi Arabia also as it has been affected by the Iran war, both directly and indirectly. Though it can bypass Hormuz for export of oil using the pipe line to Red sea, the damage to its oil refineries is such that it will take months to repair and reconstruct them. The financial loss caused by the fall of oil production by 10 per cent following the war has already forced the Kingdom to shelve its mega project Vision 2030. As in the Gulf countries, construction, tourism and service sectors in Saudi Arabia have all been badly hurt leading to near-closure or retrenchments of workers. More than 40 per cent of Bangladeshi workers are employed in Saudi Arabia and the spectre of unemployment for them is likely to appear soon causing a sharp fall in remittance. The question is not when but for how long the catastrophe will last. The fourth scenario delineated above is not considered likely yet. But countries having their wage workers in Saudi Arabia and the Gulf countries have to take into consideration the first three scenarios.
As for the impact on Bangladesh, even the medium case scenario will spell economic disaster impacting significantly on the remittance volume. According to recent record, 46 per cent of total remittance comes from Gulf countries. Bangladesh received roughly $32 billion in remittance in 2025 from the region. If 5 to 10 lakh Bangladeshi workers lose jobs, Bangladesh stands to lose at least half the amount it received in remittance before the war. This would create (a) foreign exchange shortages aggravating balace of payment position, (b) weakening of Taka, (c) slowdown in construction of infrastructures, (d) increase in domestic unemployment, (e) decrease in rural households income and consumption. What is to be done: an emergency drive should be made to diversify and increase the volume of exports to compensate the likely decline in remittance. Government to government negotiations should be made with Japan, South Korea and Malaysia to increase the number of Bangladeshi workers. Finally, Saudi Arabia and the Gulf countries should be requested not to send back Bangladeshi workers and allow them to be employed in alternative jobs.
The latest news about inflow of remittance defies the dire state of economies of the Middle-East countries hosting bulk of Bangladeshi wage earners. From Saudi Arabia to Gulf countries, the winds of war threaten the oil-based economies with declining growth and in the case of smaller states even collapse, with adverse impact on demand for labour.

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