Why remittance inflows stay below $3b for second straight month
Remittance inflows declined again in July after falling in June, with expatriate Bangladeshis sending home nearly $2.86 billion during the month.
In June, remittances totalled $2.82 billion, according to data released on Sunday by Bangladesh Bank. The decline comes after six consecutive months in which monthly remittance inflows exceeded $3 billion.
The drop has raised concerns among many bankers, who note that remittances are one of Bangladesh’s largest sources of foreign currency.
They said remittance inflows had remained above $3 billion for six straight months despite no significant increase in overseas employment, making the recent decline a matter of concern.
Monthly inflows
According to Bangladesh Bank, expatriate Bangladeshis sent $2.859 billion in remittances in July, compared with $2.478 billion in the same month last year, marking a 15.4 per cent year-on-year increase.
The central bank’s data show remittance inflows reached $3.425 billion in May, $3.127 billion in April and nearly $3.75 billion in March. Before that, Bangladesh received $3.02 billion in February, $3.17 billion in January and $3.22 billion in December last year.
The economists said it is still unclear how severe the crisis could become. If the global situation worsens, it could increase pressure on both the country’s reserves and the exchange rate.
As a result, remittance inflows exceeded $3 billion every month from December through May. Islami Bank remained the largest remittance-collecting bank, followed by Bangladesh Krishi Bank.
Why the decline?
Meanwhile, the exchange rate of the US dollar has risen slightly in the domestic market. After Bangladesh Bank stepped up oversight of commercial banks that were purchasing remittance dollars at higher rates, remittance inflows began to slow, according to bank officials, who believe the tighter monitoring may have contributed to the decline.
At the same time, the Middle East crisis has pushed up the value of the US dollar in the remittance market. To prepare for possible economic shocks, eight leading economists recently advised Bangladesh Bank to preserve the country’s foreign exchange reserves.
The economists said it is still unclear how severe the crisis could become. If the global situation worsens, it could increase pressure on both the country’s reserves and the exchange rate.
They recommended maintaining reserve levels and avoiding an immediate cut in the policy interest rate, arguing that interest rates could be lowered later to encourage investment once external pressures ease.
However, Bangladesh Bank reduced its policy interest rate last Thursday night, with the new rate taking effect from Sunday.