Swelling foreign remittance account of Bangladesh
Wednesday, 2 January 2008
FOREIGN currencies sent by wage earners and other expatriate Bangladeshis to their families and relatives at home are turning into the largest foreign exchange earner other than export. The annual volume of such foreign exchange entering the economy, however, is yet to go a long way before becoming the major contributor to the country's Gross Domestic Product (GDP). Nevertheless, with its present level of contribution at 9.1 per cent of the GDP as of 2006, the impact of the remittance could still be felt in the regions of the country that can boast of having the highest number of people working abroad. How is one to measure the impact of the foreign remittance on areas from where the largest number of wage earners are staying overseas?
The primary effect of the injection of the remittance in any area is the increase in the level of prosperity among the people receiving the money. The secondary effect is the creation of new job opportunities in the area stimulated by the money. Or in other words, the money creates a ripple effect on the local economy. This change in the local economy does also leave its impact on the overall poverty situation. A World Bank report has shown that the poverty rate has fallen in the Dhaka, Sylhet and Chittagong regions between the years 2000 and 20005. The correlation between this fall of poverty and the inflow of foreign remittance has been positively established for those districts. Contrasted to this, the picture is quite different in the western and southern districts such as Khulna, Barisal and Rajshahi where poverty situation has either worsened or remained stagnant. What is of interest here is the inflow of remittance in this region is also low compared to the Eastern districts mentioned before.
A report of the Global Remittance Guide from Washington says that Bangladesh has become the fifth largest recipient of remittance by migrant workers and other expatriates leaving behind Pakistan in 2006. Last year the total volume of remittance received was US $5.8 billion, a figure that is far lower than Philippines, which received US$14.9 billion to be ranked as the fourth largest recipient of remittance from the migrants preceded by China, Mexico and India in that order. Needless to say, India with its US$25.70 billion accounting for the remittances made by the migrants has climbed to the top position among other remittance recipient countries in the world.
Considering the size of the population, it stills leaves a lot to be desired from Bangladesh when one compares its position with the Philippines which has earned nearly three times as much in 2006 in terms of foreign remittance. However, the volume of remittance receipts by Bangladesh coming through formal channels as shown in the Global Remittances Guide's report does not still provide the real picture of remittance inflow in the country. In fact, the informal channels are still playing a major part in transferring the remittance money, thereby depriving the government of a huge sum of foreign currency every year. In this situation, the government needs to give a closer look at the performance of the formal vehicles of money transfer including the banks already in operation abroad. Those should be made easier, friendlier, more accessible and gainful for the wage earners so that the latter may feel more at home with those vehicles of money transfer at work in the host countries. Such steps would certainly leave their impact through enlarging the foreign exchange account of the economy.
When one looks at the overall performance of the economy, one cannot but appreciate the commendable role being played by the remittance earnings, especially when one compares the same with the export. What is more heartening is the volume of remittance recorded through formal channels has already put the external assistance received from the donors and, even the foreign investments reaching the economy, in the shade.
The primary effect of the injection of the remittance in any area is the increase in the level of prosperity among the people receiving the money. The secondary effect is the creation of new job opportunities in the area stimulated by the money. Or in other words, the money creates a ripple effect on the local economy. This change in the local economy does also leave its impact on the overall poverty situation. A World Bank report has shown that the poverty rate has fallen in the Dhaka, Sylhet and Chittagong regions between the years 2000 and 20005. The correlation between this fall of poverty and the inflow of foreign remittance has been positively established for those districts. Contrasted to this, the picture is quite different in the western and southern districts such as Khulna, Barisal and Rajshahi where poverty situation has either worsened or remained stagnant. What is of interest here is the inflow of remittance in this region is also low compared to the Eastern districts mentioned before.
A report of the Global Remittance Guide from Washington says that Bangladesh has become the fifth largest recipient of remittance by migrant workers and other expatriates leaving behind Pakistan in 2006. Last year the total volume of remittance received was US $5.8 billion, a figure that is far lower than Philippines, which received US$14.9 billion to be ranked as the fourth largest recipient of remittance from the migrants preceded by China, Mexico and India in that order. Needless to say, India with its US$25.70 billion accounting for the remittances made by the migrants has climbed to the top position among other remittance recipient countries in the world.
Considering the size of the population, it stills leaves a lot to be desired from Bangladesh when one compares its position with the Philippines which has earned nearly three times as much in 2006 in terms of foreign remittance. However, the volume of remittance receipts by Bangladesh coming through formal channels as shown in the Global Remittances Guide's report does not still provide the real picture of remittance inflow in the country. In fact, the informal channels are still playing a major part in transferring the remittance money, thereby depriving the government of a huge sum of foreign currency every year. In this situation, the government needs to give a closer look at the performance of the formal vehicles of money transfer including the banks already in operation abroad. Those should be made easier, friendlier, more accessible and gainful for the wage earners so that the latter may feel more at home with those vehicles of money transfer at work in the host countries. Such steps would certainly leave their impact through enlarging the foreign exchange account of the economy.
When one looks at the overall performance of the economy, one cannot but appreciate the commendable role being played by the remittance earnings, especially when one compares the same with the export. What is more heartening is the volume of remittance recorded through formal channels has already put the external assistance received from the donors and, even the foreign investments reaching the economy, in the shade.