Friday, 12 August, 2022

Remittance falls 15pc in FY22

Remittance falls 15pc in FY22

Bangladesh has received $21.03 billion remittance in the just-concluded fiscal year 2021-22, dropping over 15 percent from the previous year although the government offered more than 2 percent incentive.

The expatriates sent home over more than $24.77 billion in the FY2020-21, the Bangladesh Bank data showed.

The central bank and the banking sector people attributed the decline to the increased use of informal channels called “hundi” as they offer higher exchange rates of dollar against taka.

According to official figures, the volume of inward remittances had been showing a downward trend in the last couple of months.

The remittance inflow declined by around 5.0 per cent in June alone compared to that of the previous month.

Expatriate Bangladeshis remitted nearly $1.84 billion in June 2022 while the amount was about $1.94 billion in May, the central bank figures revealed.

The government raised the rate of incentives by 0.5 percent to 2.5 percent from January 2022 aimed at encouraging remittance through legal channels.

Although the government along with the central bank took some measures to boost remittances through formal channels, there were hardly any positive response.

The government introduced a 2 percent incentive on inward remittances in FY2019-20 to encourage the expatriates remitting money through official channels.

Later, the government raised the rate of incentives by 0.5 per cent to 2.5 per cent from January 2022, which has been kept unchanged in the budget for FY 2022-23.

Besides, the government has also withdrawn the mandatory provision for submission of earning documents of the remitters in the case of availing cash incentives against remittances exceeding the amount of $ 5,000.

Despite such measures, the volume of inward remittances showed downward trends in all the months of the 2021-22 fiscal year.

The banking sector experts said remittance inflow increased through informal channels as taka-dollar exchange rate is higher in informal channels compared to former channels.

Currently, the banks are giving Tk 95 to Tk 96 per US dollar including 2.5 percent cash incentive, while the exchange rate is Tk 98 to Tk 99 at the open market, the banking sector sources said.

Some people familiar with the matter said the difference between curb market and banking channel is Tk 7-8.

“If the difference is such big, remitters will not take interest in sending remittance through the banking channels.

At any cost, the rates should be adjusted and the difference should be narrowed to only Tk 1-2,” said noted economic analyst Dr Ahsan H Mansur.

He thinks that the incentive paid on remittance didn’t work so much to attract the remitters. The government should more focus on simplifying the remittance process through formal channels.

 At the same time, the government should send abroad skilled manpower to enhance the remittance inflow, he suggested.

Some analysts also suggested looking into the factors behind the fall in remittances and taking specific measures for the countries, from where the remittance inflow fell.