Total remittance in 2013 declined in absolute term from 2012 by $34 billion from $1418 billion to $1384 billion. Remittance has been identified as one of the two growth enablers in the recent years by the World Bank. At the time when all economic activities at the domestic front stumble due to political instability and vandalism, remittance is the only factor that could help Bangladesh maintain a reasonable growth rate. From this perspective, the news of declining remittance came as a shock.
As far as economic data are concerned, global economy in 2013 did not face any particular bump to negatively affect the earnings of our migrated workers. Therefore, the reason for this absolute decline in remittance is not straightforward and fathomable. For the sake of a decent economic growth, policy makers should look into this seriously to find out the reasons for it and mend them as early as possible. In addition to growth effects, fall in remittance also deserves a close attention because of its distributional impact. The main beneficiaries of remittance are the rural low-income people. The much-talked-about vibrancy as well as the resilience of rural economy are attributable to remittance. That is why, policymakers cannot simply disregard the observed decline in remittance.
Remittance is also a significant contributor to poverty reduction. From a dynamic point of view, poverty is a flow involving movement of people in and out of the poverty trap. For successful alleviation of poverty, movement of people into poverty has to be checked along with helping people who are already into this trap to come out of it. Here lies the importance of remittance.
Available information on migrant workers implies that most of them belong to socio-economic groups who are either poor or have narrowly escaped from it. Remittance checks their collapse into the poverty trap. In absence of remittance, these households would have fallen into poverty trap, increasing the aggregate number of the poor in the country. As a result, alleviation of poverty at the current rate would have been difficult.
According to a recent study conducted by South Asia Network of Economic Research Institute (SANEI), most of male migrants (37.41 per cent) are the sole bread-earners of their families and no other member of their families has any income. It is even higher in case of female migrants, 98.48 per cent of them are the sole earners in their families. About 15.35 per cent male members have income-range between Tk 1,000-3,000, followed by 13.67 per cent between Tk 15,001-20,000. All it means is that the living standard of the whole family of the migrant workers significantly depends on the amount of income sent from abroad. Whether a family can continue to remain above poverty line, whether the children can continue their education, whether they can avail of the minimal health services, all depends on the amount of the money sent by their family member(s) working abroad.
Remittance in Bangladesh has a spatial dimension as well. Although people from all over the country goes abroad for work, according to International Organisation for Migration (IOM), Comilla, Chittagong, Tangail, Bhramanbaria and Dhaka are the districts with the highest number of migrants. Households from these districts are more likely to be affected by any fall in remittance.
What could be the reason for decline in remittance in the last year? One possibility could be the depreciation of local currency of the countries where our migrants work against dollar. Most of our migrant workers work in countries where dollar is not the medium of exchange. Consider an example. Suppose one Bangladeshi migrant working in Malaysia gets a monthly salary of 3000 ringgit (Malaysian currency) and he sends the whole amount to Bangladesh. Assuming that one gets 3.0 ringgit against 1.0 dollar, this person sends $1000 to Bangladesh. If he continues to send the same amount, 1.0 dollar will now fetch around 3.5 ringgit (meaning ringgit has depreciated) and Bangladesh will receive $857.14. It means 142.86 dollar is lost in conversion.
Can the loss in conversion explain the fall in remittance? It depends which countries are our main sources of remittance and to what extent the currency of those countries depreciated last year.
The Middle East is the main destination of our migrant workers. The top five destinations for Bangladeshi workers are Saudi Arabia (37 per cent), United Arab Emirates (26 per cent), Malaysia (10 per cent), Kuwait (7.0 per cent), and Oman (6.0 per cent) (Source: International Organisation for Migration, Bangladesh website). The currency of all these Middle Eastern countries did not depreciate against dollar during the last year. In fact, their value against dollar remained unchanged. Only the Malaysian currency depreciated against dollar by 10 per cent last year. But such a decrease is not adequate to justify the recent decline in remittance received by Bangladesh.
Another possibility could be that many of our migrant workers have stopped using the formal channel to send money. With the growth of our reserve, dollar against taka is supposed to depreciate in a free market setting, in other words, taka is expected to appreciate. Such an appreciation of taka is not good for our export. This is the main reason why Bangladesh Bank has been intervening significantly through purchase of dollar to avoid appreciation of taka. This kind of intervention creates a difference in value of dollar against formal and informal market. For example, currently the value of one dollar in formal market is about Tk 77.75, whereas it is about Tk 78.50 or more in informal market. This may induce many not to use the formal channel to remit their income. This is just a possibility. To what extent it has been the real cause for decline in our reported remittance is a matter of research and in-depth exploration.
We cannot rule out another possibility that can be a significant reason for decline in remittance. May be the total number of our migrant workers has declined in absolute terms last year. We have both legal and illegal migrant workers going abroad using different channels and routes. Not all of them are on record. As a result, it is very difficult to know the actual number of Bangladeshi workers working abroad. This question needs to be further explored to see whether our remittance declined due to fall in the number of expatriate wsorkers .
As mentioned above, remittance has played a significant role as a contributor to our growth, as a poverty alleviator, and as a source of our economic vibrancy and resilience. This is why, recent decline in remittance deserves a close attention to find out the reasons. Needless to mention, whatever may have caused this decline, it needs to be taken care of without delay.
Abul Basher, PhD is Researcher at Bangladesh Institute of Development Studies (BIDS), former economist, World Bank, and former faculty, Willamette University, USA. [email protected]
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