Remittance inflow hits record high in FY21

Remittance inflows hit a record high with over 36% growth in the just-concluded fiscal year despite the ongoing Covid-19 pandemic. 

The figure jumped to $24.78 billion from $18.2 billion a year ago, according to the Bangladesh Bank's latest statistics released on Monday. 

In June this year, the money sent by Bangladeshi migrant workers amounted to $1.94 billion, which was around 6% higher than that in the same month a year ago.

Remittance inflow has been increasing since June last year, which exceeded $2.5 billion in July this year.

According to a recent central bank report on high remittance inflow amid Covid-19, the uplift in remittances was possible because of the government and the central bank's proactive measures such as providing incentives to remittance senders through formal channels as well as the repatriation of funds by the migrant workers in the wake of Covid-19 related uncertainties.

Experts say a 2% incentive for remittance receipts apart, the use of banking channels by remittance senders amid lockdowns has also led to a rise in inflows. 

Dr Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, said one of the strong reasons why remittance inflows have posted a significant rise is the use of the "hundi system", an illegal cross-boundary financial settlement, has remained stopped because of air communication suspension in the pandemic situation.

Had illegal channels had not stopped, remittance inflows would not have increased so much in a year despite the present incentive benefit. 

Remitters have taken the advantage of a cut in cost for sending remittances using legal channels and non-requirement of paperwork for a maximum of $5,000 or Tk5 lakh to receive an incentive, Mustafizur added.

This economist said, "High remittance flows have contributed to our macroeconomic management in a number of ways. The income of remittance-receiving families has increased when that of many people has declined amid Covid-19."

This income growth boosted demand in the economy as a whole, which led to the continuation of production. Production continued, so did supply. Remittances have also helped increase foreign exchange reserves. And the reserve has kept the exchange rate stable.

The existing 2% incentive is continuing in the current fiscal year too.

Besides, many banks have already increased incentives against remittance receipts to 3% from 2$ after Finance Minister AHM Mustafa Kamal in the budget for FY22 announced special package programmes would be initiated by banks concerned to increase remittances through the banking channel.

Dr Tasnim Siddiqui, the chairperson of Refugee and Migratory Movements Research Unit, said remittances will likely witness high inflows this year too if illegal channels remain closed.

Tasnim also proposed increasing the incentive to 4%, saying that expatriates deserve it as they are contributing to keeping the economy afloat during this pandemic time.