The global lender predicted that the job generation for South Asian workers may hamper in the Gulf countries, major sources of remittance for Bangladesh, next year
- Remittances inflow to remain flat due to lingering impacts of balance of payment crisis
- Hundi market facilitates money smuggling and diverts remittances
- Exchange rate controls lead migrants to opt for informal channel
- Implementation of IMF-supported policy programmes may boost migrants’ confidence in banking system
The World Bank estimates that remittance flows to Bangladesh will reach $23 billion in 2023 and projected that the growth will remain flat next year.
“Growth in formal remittances to Bangladesh is projected to remain flat on account of the lingering impacts of the recent balance of payment crisis that triggered exchange controls and led to parallel market exchange rate premia,” according to the WB’s latest Migration and Development Brief released on Monday (18 December).
Depreciation and exchange rate management policies have led migrants in Bangladesh, Pakistan, and Sri Lanka to take advantage of the black-market premia and transfer funds through informal and formal channels, it said.
“Remittance flows to Bangladesh are projected to remain at $23 billion in 2023,” the WB report said.
According to data from the Bureau of Manpower, Employment and Training, the country has sent a staggering 12.46 lakh workers abroad until 11 December 2023, surpassing last year’s figure of 11.35 lakh.
While the labour export sector has witnessed remarkable growth, remittance inflows remained stagnant for the past two calendar years, hovering at the $22-billion mark.
The global lender predicted that the job generation for South Asian workers may hamper in the Gulf countries, major sources of remittance for Bangladesh, next year.
“While the growth outlook in the GCC [Gulf Cooperation Council] countries is positive, new job creation for South Asian migrants in 2024 is expected to be constrained by low oil prices,” the report said.
‘The exchange rate issue is problematic’
Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), told “The exchange rate issue is problematic because it is still not market-based. This is a major reason why remittances are not coming through official channels.”
“Secondly, a large amount of money has been and is still being smuggled out of our country. The hundi market is necessary for smugglers so that remittances do not come through formal channels and foreign currency remains abroad. This is helping smuggle money out of the country,” he added.
“Recently, the IMF has said that a large portion of export proceeds has not come to the country. This means that foreign currency remittances are not coming to the country. The main reason for this is that the hundi market is still quite strong.”
He suggests moving towards a market-based exchange rate, resolving problems in sending remittances through formal channels, and stopping illegal money transfers from the country.
“If these measures are not taken, I agree with the projections that there will be no significant improvement in formal remittance flows.”
Bangladesh has already received $19.93 billion in remittances in the first 11 months of the current year, according to Bangladesh Bank data.
The latest WB report also said that Bangladesh and Sri Lanka are heading to turn the tide of negative growth in formal remittance flows in the current year from 2022 triggered by balance of payment crises.
“With improvements in domestic economic conditions following the implementation of IMF-supported policy programmes, migrants’ confidence in the official banking system seems to be gradually increasing as evident in more remittances being sent through formal channels,” it said.
Remittance flows to South Asia are estimated to have grown 7.2% in 2023 to reach $189 billion, tapering off from the over 12% increase in 2022, according to the WB report.
The increase is attributable entirely to remittance flows to India, which are expected to beat previous forecasts by $14 billion and reach $125 billion in 2023.
The key drivers of remittance growth in 2023 are a historically tight labour market in the United States, high employment growth in Europe reflecting extensive leveraging of worker retention programmes, and a dampening of inflation in high-income countries.
In 2024, growth in remittance flows is expected to fall to 5% due to projected weaker economic growth in the United States, the Euro Area, and GCC countries, major hosts of migrant workers from the region, said the WB report.
Government measures to boost remittance
Currently, the government provides Tk2.5 cash incentives to boost remittance inflow. In addition to that, banks can offer more competitive rates on remittances, which could encourage more people to send money home through the banking channel.
Cabinet Secretary Md Mahbub Hossain yesterday called for an investigation into the reasons why remittances are lower than the number of workers.
In an event organised by the Ministry of Expatriates’ Welfare and Overseas Employment on the occasion of International Migrants Day, he said, “It is important to encourage expatriates to send remittances through legit channels. Many people may not be aware of the government benefits available for sending remittances through formal channels. Therefore, we need to increase awareness about these benefits. We also need to address any institutional weaknesses that may exist in this area.”
Dr Ahmed Munirus Saleheen, secretary of the expatriate welfare and overseas employment ministry, said at the event, “We are providing more emphasis on sending skilled workers to get more remittance.”
