Remittances drop 15% in FY22

Remittance inflows declined 15% in the outgoing financial year compared to the fiscal 2020-21 when expatriates had sent home the highest amount in the country's history amid the Covid-19 pandemic.

In the fiscal 2021-22, expatriates sent $21.03 billion through official channels which was $24.77 billion in the previous fiscal year, according to data from the Bangladesh Bank.

In June, the final month of FY22, Bangladesh received remittances of $1.84 billion, down from $1.94 billion in the same month a year ago. As such, remittances declined by 5.33% year-on-year.

According to industry insiders, expatriates had sent more remittances keeping in mind their families amid the pandemic in the fiscal 2020-21. In addition, the hundi – an informal cross-border fund transfer system – was almost closed due to Covid, so more remittances came to the banking channel. Remittances dropped in the outgoing fiscal year as Covid eased.

They also said the forex market was volatile in the fiscal 2021-22 when many expatriates sent money through informal channels as dollar price was higher in the open market. If the central bank adjusts the dollar price with formal channels, remittances through banks will increase further.

The fiscal 2021-22 saw a $2.82 billion increase in remittance inflows compared to $18.20 billion in the fiscal 2019-20 which experienced the beginning of the pandemic, according to the central bank data. 

Remittance – an important indicator of the economy - increased in December and January after five consecutive months of decline in the outgoing fiscal year. But it stumbled again in February while March saw remittance inflows of $1.85 billion.

Later in April, remittances were the highest at $2.01 billion in eleven months. In May, remittances reached $1.88 billion.

The flow of remittances has been a bit upward since last April thanks to two religious festivals of Muslims – Eid-ul-Fitr and Eid-ul-Azha.

Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), told The Business Standard, "To increase remittances, the gap between the official rate and kerb market has to be reduced."

"Now about one lakh people are going abroad every month and we will get a good result in the current financial year," he added.

The monetary policy announced by the central bank for the fiscal year 2022-23 states that both export earnings and import expenditure in the outgoing fiscal year grew but the growth in export earnings was comparatively less.

Besides, remittances sent by expatriates were much less than in the previous financial year. Therefore, it has set a growth target of 15% in the current financial year as compared to the previous financial year. As such, the remittance target for the current financial year is $24 billion.

In the outgoing financial year, the inflow of remittances was low and the volume of imports increased at a high rate, forcing the central bank to sell more dollars to the market.

As of August 2021, the country's reserves stood at $48 billion. The reserves dropped to $41.86 billion as of June 29 this year, with about $7.62 billion sold in the last fiscal year.