Bangladesh’s remittance inflow drops 5.87% in July

Remittances, which have helped Bangladesh pay for imports, have been unstable in the past few years

A day after the exchange rate of dollars for remittances was set at Tk 109, Bangladesh Bank revealed that inflows fell by 5.87 percent in July.

The inward remittance in July was $1.97 billion, down $120.31 million year-on-year, according to data released by the central bank on Wednesday.

Migrant workers from Bangladesh sent approximately $2.10 billion back home in July 2022.

However, the remittance inflow in July was still at its third-highest level since August 2022.

Remittances play a major role in Bangladesh to meet import costs. The amount has fluctuated in recent years, rising and falling at different times in the past few years.

Amid this volatility, FY23 started with a downward trend. But the end of the fiscal year saw an improvement.

On Aug 1, the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and Bank Executives Association (ABB) raised the exchange rate by Tk 0.50 per dollar to increase remittance flow through banking channels. With the incentive, the remittance rate will be Tk 109 per dollar from now on.

According to the data of the latest remittance report, in July, $244.5 million came through state-owned banks, $57 million through specialised banks, $1.67 billion dollars through private banks and $6.3 million through foreign banks.

Even though imports have been brought under control, the foreign exchange market is still under pressure. To meet the demand, over $1 billion was sold to traders in July, the first month of the current fiscal year. The amount sold to traders in FY23 was about $13 billion. In FY22, it was about $7.62 billion.

According to the central bank policy, a limit (NOP-Net Open Position) has been set for how much foreign currency a bank can store.

Earlier, banks were allowed to reserve up to 20 percent of their regulatory capital in foreign currency. To reduce the volatility of the dollar market, the central bank reduced it to 15 percent on Jul 15, 2022.

Banks have an obligation to sell dollars in excess of this limit to the central bank or any other bank.

Bangladesh Bank had previously bought dollars from banks to restrict supply, but is now selling the greenback to support them.