Despite a surge in the outflow of migrant workers, remittances to Bangladesh declined due to illegal hundi money business, experts.
They said the exchange rate gap between the formal and informal channels has encouraged remitters to use hundi and send money through such illegal channel.
Dr Zahid Hussain, a former lead economist of the World Bank's Dhaka office, told Bangladesh Post that imposing multiple exchange rate for exporters, importers and inward remittance is the key reason for encouraging expatriates to send money through hundi which pushed down remittances.
He said, “Look at the month-on-month remittance-inflow trend. In the first two weeks of September, Bangladesh received nearly $1.0 billion worth of remittance. But it started to fall from the 3rd week. During 3rd and 4th weeks of September, the workers sent some $500 million. In October, the remittance fell further.”
“If a Bangladeshi expatriate in an overseas country sends foreign exchange to Bangladesh through exchange house, his family will get money at Tk 108 against one USD from the exchange house and Tk 99 from the banks and non-banking institutions. At the same time, he can get Tk 112-116 in the informal channel,” he mentioned.
Dr Ahsan H Mansur, Executive Director of Policy Research Institute of Bangladesh (PRI), said, “The positive flow of remittances can never be sustained with incentives. To stop the hundi, the government first increased cash incentive to 2 percent, then it increased to 2.5 percent. But transection through the hundi is not closing even it is rising. What needs to be done here is to stabilize the dollar market. The difference between carb market and bank dollar prices should be reduced. As long as this difference is more, the hundi will not be closed.”
Mohammad Abul Bashar, president of the Bangladesh Association of International Recruiting Agencies (BAIRA), said, “We have sent 1.5 million people abroad. But it is sad that remittances are not increasing even though the export of manpower is increasing. The main reason for this is hundi. Illegal hundi activities were stopped worldwide due to the shutdown of everything for the Corona pandemic. But since the Corona situation normalized, Hundi activities have started again. It has increased in recent times due to volatility in the dollar market.”
However, despite a record in manpower exports, remittance flows from expatriates, one of the main sources of foreign exchange reserves, have declined in the last year.
Bangladesh received $21.28 billion inward remittance in December 2022 through the banking channel, down by 3.56 percent compared to the previous year.
On the other hand, 1.15 million people have gone to different countries for work in 2022, surpassing all previous records which was 86.32 percent more than the previous year amounting 6.17 lakh in 2021.
Experts and economists said that because of the price of the dollar is higher in the open market or the curb market than in banks, remittances have decreased as expatriates send money to the country through illegal hundi as they get more money.
Meanwhile, the remittances increased by 4.23 percent to stand $1.70 billion in December 2022.
Remittance witnessed a rising trend and crossed $10 billion during the July-December period after declining for two consecutive months.
Remittance from expatriates, one of the main sources of foreign exchange reserves, have started to increase again after various measures taken by Bangladesh Bank, including tough steps against illegal hundi money transferring business.
According to the data of Bangladesh Bank, in the first six months of the current fiscal year 2022-23, expatriates have sent about $10.42 billion.
After two consecutive months of heavy decline, the remittance returned to positive trend last November and is continuing in December, the month of victory.
Last November, expatriates sent $1594.70 million. An average of $53.10 million came every day. In the previous two months, October and September, $49.20 million and $51.30 million respectively came daily.
In the first two months of the current fiscal year 2022-23, in July and August, remittances came to the country in the amount of about $70 million per day.
Remittances stood at $2.09 billion in July, $2.04 billion in August, $1.54 billion in September and $1.52 billion in October in the current fiscal year 2022-23.
Economists and bankers said remittances returned to a positive trend in November after falling for two consecutive months due to various measures taken by the central bank.
As the trend turned more positive in December, relief began to return, they said, suggesting that the Central Bank should take tougher steps to ban hundi to increase remittances through legal channels.
Bangladesh Bank officials hope that the amount of remittances will reach $2 billion in the month of December like July and August this year. However, a continued decline in remittance flows from expatriates increased in November.
Bangladesh received record $2.10 billion remittances in July, the first month of the fiscal year 2022-23, due to Eid-ul-Azha festival when expatriate Bangladeshis usually send home more money than any other time.
The figure is the highest in 14 months and 12 percent higher than the $1.87 billion remittance the country received in the same month of the previous FY.
Eid-ul-Fitr was celebrated in the country on May 3. Expatriates sent a total of $2.09 billion in remittance to the country in April ahead of Eid. It was the highest amount in a single month of the last fiscal year.
The country received $22.07 billion in remittances in 2021, which was higher than any other years in the history of Bangladesh. This inflow was $21.78 billion in 2020 and $18.33 billion in 2019.
This important index of the economy increased last December and January after a decline in five consecutive months (July-November 2021). In December and January, remittance was $1.63 billion and $1.70 billion respectively.
In February, this inflow dropped again as expatriates sent $1.49 billion during the time.
However, the country’s migrants sent home $1.86 billion in March ahead of Ramadan this year, which is 25 percent higher than that of the previous month and also the highest in the past eight months.
On the other hand, Bangladesh’s reserves are increasing again despite the Bangladesh Bank giving a record amount in dollar support to the commercial banks from the reserves.
Experts said the reserves are rising slightly again thanks to a declining trend in import payments.
Till last November 30, reserves, the most important indicator of the economy, dropped to $33.86 billion, falling below $34 billion.
In the past few days it has increased again to cross $34 billion to stand at $34.13 billion till December 27, according to BB data.
On August 24 last year, the reserves crossed the $48 billion milestone, surpassing all past records.
