Shrinking remittances fuel concerns over Bangladesh economy taking a hit

The flow of remittance, on which Bangladesh's economic stability has continued amidst a global recession, has been declining.

The money sent by Bangladeshi expatriates from across the world – a key plank of the economy – has been dipping since the beginning of the current fiscal year.

Economists are concerned that the drop in Bangladesh's most reliable source of foreign funding may affect the macro-economy.

Remittance contributed 13 percent of the gross national product of 2015.

According to data released by Bangladesh Bank on Wednesday, Bangladesh received around $4.26 billion in the first four months (July-October) of the 2016-17 fiscal year.

The figure was down 15.42 percent from a little over $5.03 billion received in the corresponding period last year.

The October remittance, $1.01 billion, is 4.23 percent less than that of September and 8 percent less than last year’s October remittance.

Zaid Bakht

Researcher Zaid Bakht says the continuous drop in cash flows for the past few months has already affected the macro-economy 'negatively'.

"If the downward trend continues, it may hit the ascending growth of GDP," he told bdnews24.com.

The World Bank Lead Economist in Dhaka, Zahid Hussain, says the drop in remittance is one of the three challenges Bangladesh's economy is facing now.

Zahid Hussain

The other challenges are low investment in private sector and the effects of Britain's exit from European Union on global economy.

Analysts blamed global austerity measures leading to low income of expatriates for the drop in remittance. They also think illegal channels of sending money like 'Hundi' is causing the drop.

State-run Agrani Bank Chairman Bakht said the expatriates prefer the illegal channels to legal ones in the hope of profit following devaluation of foreign currencies.

According to a recent government report, 78 percent of the money sent by 8.6 million Bangladeshis working abroad comes through banks and 12 percent through 'Hundi'.

In 2015-16 fiscal year, remittance dropped by 2.52 percent. It rose 7.6 percent in the previous fiscal year.

Though the remittance is dropping, the foreign exchange reserves are in a 'satisfactory' state. The reserves were $31.9 billion on Wednesday, with hopes that they may cross the $32 billion mark within a day or two.

Bakht and Zahid credited the rise in the flow of foreign loans and drop in import cost for the 'satisfactory' reserves.