Remittance growth slows in December, forex reserves cross $43b

The remittance inflow growth that remained high in the first five months of the current financial year (July-November) even amid the ongoing pandemic situation has started to fall.

In December, the year-on-year growth in remittance inflow slowed to about 20% in contrast to a whopping 62% recorded in July this year.

However, in the first six months of the current fiscal, 67% more remittances came to the country as compared to the same period of the previous year.

Money sent home by expatriate Bangladeshis in the July-December period of this year stands at 12.81 billion, up from $9.41 billion in the same period of last year.

Asked, Mahfuz Kabir, research director of the Bangladesh Institute of International and Strategic Studies (BIISS), told The Business Standard that economic activities in many countries, including those in the Middle East, began to stagnate again due to the second wave of the novel coronavirus, resulting in the drop in remittance inflow in December.

He, however, said the situation would improve once the coronavirus vaccine is introduced.

Explaining the reasons for the increase in remittance inflow in recent months, Zahid Hussain, former lead economist at the World Bank's Dhaka office, said remittance flows in the banking channels have increased due to the closure of illegal channels amid the pandemic. The 2% incentive given by the government is also one of the reasons for the increase in remittances, he added.

He also predicted that the high growth of remittance flows will continue in the future as informal channels are closed due to the second wave of Covid-19.

Meanwhile, foreign exchange reserves of the country have crossed $43 billion thanks to high inflow of remittance. As of 29 December, the forex reserves stand at. $43.17 billion.

Finance Minister AHM Mustafa Kamal told the media that foreign exchange reserves' crossing the $43 billion mark is a new record for Bangladesh. "This is one of the major milestones of our economic capability."

He said it is a very auspicious event for the country on the eve of the new year. High inflow of remittances is also playing an important role in increasing the reserves despite the unprecedented impact of Covid-19.

At an event last month, the finance minister expressed hope that foreign exchange reserves of the country would exceed $50 billion by December 2021.

Speaking at a press conference after a meeting of the Cabinet Committee on Public Purchase on 18 December this year, the finance minister said the issue of borrowing from the reserves for various government projects could be finalised before the next budget.