Concern growing over reduction of remittance flow

Swarnomoyee Mostafa Oishy:

Due to several initiatives by the government and Bangladesh Bank, import dependency has started reducing that causes a bit of relief. But, frustration has gripped over the fall of remittance.

According to the sources, expatriates have sent $106 million of remittance in the first 18 days of November. If remittances come at this rate in the remaining days of the month, like September-October, the remittances will be a little more than one and a half billion dollars. However, in the first two months of the current financial year, in July and August, expatriates sent remittances of more than 200 million dollars. Various measures taken by the government and Bangladesh Bank to curb abnormal import expenditure are getting good results. Imports have decreased considerably; the opening of letters of credit or LCs for imports of goods has come down by half.

The government is feeling a kind of relief. But the government is very uncomfortable with the continuous reduction of remittances sent by expatriates, one of the main sources of foreign exchange reserves. As in September-October, the downward trend of remittances sent by expatriates continues in the current month of November.

Bangladesh Bank on Sunday released the 18-day data of current month’s remittance flow. It shows that, in the first 18 days of November, expatriates have sent 106 crore (1.06 billion) dollars.

According to this, an average of 5.88 crore dollar remittances has arrived in the country every day.

Economic researcher Ahsan H Mansoor said that, remittances flow is decreasing due to the increase in illegal Hundi due to volatility in the dollar market.

He fears that, if it cannot be stopped, the amount of reserves will decrease further. In the first two months of the current fiscal year 2022-23 July and August, expatriates sent an average of $70 million in remittances per day.

If remittances come at this rate in the remaining days of this month, remittances of a little more than one and a half billion dollars will come in November as in September-October.

In November last year, expatriates sent 155.37 crore dollars. In the first two months (July-August) of the current financial year 2022-23, expatriates sent remittances of more than 2 billion dollars.

$2.1 billion came in July, which was the highest in the previous 14 months.

And it was 12 percent higher than last year’s July.

2.04 billion dollars came in August, then the growth was 12.60 percent. Total remittances in those two months were 4.13 billion dollars, which was 12.30 percent more than the same period of last financial year.

According to the data of the Central Bank, expatriates staying in different countries sent 153.95 crore dollars to the country last September, which was 10.84 percent less than September last year.

In September 2021, 172.67 crore dollars came to country. The next month October, at least 152.56 crore dollars came. Expatriates sent remittances of 152.54 crore (1.52 billion) dollars this month, which is the lowest in the last eight months. 164.69 crore (1.64 billion) dollars came in October last year. 154 crore dollars came in the previous month in September.

According to this, remittances have come 7.37 percent less than last year’s October. And less than September came like 1 percent. Last February, expatriates sent 149.44 crore (1.49 billion) dollars. Eight months later, the lowest remittances came in October. Along with export income, this important indicator of the economy has reduced the foreign exchange reserves to 34 billion dollars.

At the end of the day on Sunday, the amount of reserves was 34.2 billion dollars.

In August last year, this reserve surpassed all previous records and crossed $48 billion.

A year ago, on November 17, reserves stood at $44.95 billion.

Relief on imports, growing concern on remittances:

However, as of the first four months (July-October) of the current fiscal year 2022-23, Bangladesh has still maintained growth in remittance flow. Expatriates have sent 719.83 crore dollars in these four months. This figure is 2 percent higher than the same period last year. In continuation of the last fiscal year, the export income increased by 25.31 percent in the first two months (July-August) of the current fiscal year 2022-23. However, there was a negative growth of 6.25 percent in September.

According to the latest data, export earnings like remittances will come in quite low in October.

Export earnings fell by around 8 percent this month. And because of the negative trends in these two indicators, the reserve has dropped to 34 billion dollars, which is the lowest since June 30 in 2020.

Last August, 6.83 billion dollars were spent in the import sector. As such, it is possible to meet the import expenses of more than five months with the current reserves.

LC opening goes down to half:

Bangladesh Bank on Sunday released the updated information on the import of goods, it can be seen that the opening of LCs for the import of goods has been decreasing continuously since April due to various conditions. Businessmen-entrepreneurs opened LCs worth $9.80 billion (9.80 billion) in March, surpassing all previous records. It fell to $8.42 billion in April. It further decreased to $7.28 billion in May. In June, however, it increased to 8.49 billion dollars.

In July, the first month of the current fiscal year 2022-23, LC opening was $6.39 billion. LCs of $6.62 billion and $6.51 billion were opened in August and September respectively. It fell sharply to $4.74 billion in October.

On the 16th day of this November (from November 1 to November 16), businessmen-entrepreneurs opened LCs worth 170.34 crore dollars, which is 63.08 percent less than the same period last year.

According to the data, in the first four months of the current fiscal year (July-October), LCs worth 2,427 million dollars (24.27 billion) has been opened for the import of various products. This figure is 4.31 billion dollars or 15 percent less than the same period last year. LCs worth $2,858 crore were opened in these four months of last year. However, LC settlement increased by 25 percent during July-October period. In the current domestic and global context, the reduction in imports is seen as a good luck for the country’s economy by economists and bankers. They said, it was very much needed at the moment. If the import decreases, the dollar market will also become normal.

Bangladesh Bank Governor Abdur Rauf Talukder has expressed his satisfaction with the decrease in imports. The governor said, “After two and a half years of corona epidemic, our economy was under pressure like many other countries of the world due to the shock of the Russia-Ukraine war. The cost of imports had risen abnormally. As a result, the reserves have decreased. But now the situation is improving. Imports have decreased considerably. There will be no shortage of dollars in the country from January 2023 as export earnings and remittances are more than imports. The reserve will also increase.”

Salim RF Hossain, Chairman of the Association of Bankers Bangladesh (ABB) and Managing Director of BRAC Bank said, “It will take a few more months to see the impact of the reduction in new LC openings. It will decrease in early 2023. The LCs being settled now are deferred LCs opened six months or one year back. As a result of which costs are increasing. This is putting more pressure on banks, which will continue for the next two-three months. It is expected that, the import cost will decrease further from the beginning of the New Year. The dollar market will also become normal.”

According to the data of the central bank, as the corona epidemic situation has started to normalize, the cost in the import sector started to increase from the beginning of the last financial year 2021-22. Finally, the fiscal year ended with a big jump, importing of a record $89.16 billion in goods, which was 36 percent higher than the previous fiscal year.