Bangladesh received 28.62 per cent more remittance in October as the money sent by the country’s migrant workers toiling abroad kept its scintillating growth defying grim predictions.
Migrant workers remitted $2.11 billion last month, which was way higher than $1.64 billion flown to the country in the same month a year ago, data from the central bank showed yesterday.
October’s receipts were the third-highest monthly flow in history, behind July’s $2.59 billion and September’s $2.15 billion.
The increasing trend of remittances has given a huge respite to the government to manage its external sector from the ongoing economic hardship.
Experts hope the trend would be maintained in the coming months given the global economic scenario and the initiatives taken by the government.
“Along with the migrant workers, some expatriate Bangladeshis, who run businesses abroad, may also have transferred funds to the country as part of their portfolio investment,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
A portfolio investment is an ownership of a stock, bond, or other financial assets with the expectation that it will earn a return or grow in value over time, or both.
It entails passive or hands-off ownership of assets as opposed to direct investment, which would involve an active management role.
“Many countries in North America and Europe have already entered into the deadlock of a zero per cent interest rate. A country usually will take three to four years to get rid of such a situation,” Mansur said.
This has also created a deflation in the countries in the two continents. Against the backdrop, they will need several years to make their economic activities vibrant, said Mansur, also a former high official of the International Monetary Fund.
So, Bangladeshi diasporas now send money as the interest rate on deposit products offered by local lenders is much higher than those in the countries they are now based.
Local banks offer 4-6 per cent interest rate on deposits.
Mansur went on to express a hope that the upward trajectory of remittance might continue in the next few years.
The migrant workers now prefer the banking channel to hundi, an illegal cross-boundary financial transaction system, as they can transfer funds to their near and dear ones on a real-time basis thanks to technologies and through mobile financial services, Mansur said.
The two per cent cash incentive introduced by the government last year has also encouraged the expatriate Bangladeshis to send more money through the formal channel.
Between July and October, remittance hit $8.82 billion, up from 43.24 per cent year-on-year.
Diversion of remittances from informal to formal channels due to the difficulty of carrying money under travel restrictions amid the pandemic and damages inflicted by the recent floods helped Bangladesh bring the remittance flow back to the positive territory in 2020, according to a recent statement of the World Bank.
In April, the multinational lender had said money sent by the migrant workers to Bangladesh is projected at $14 billion for 2020, a fall likely of about 22 per cent because of the fallouts of the pandemic.
The rising flow from May led the WB to forecast on Friday that inbound remittance would accelerate by about 8 per cent to $19.8 billion this year.
Emranul Huq, managing director of Dhaka Bank, said the London Interbank Offered Rate (Libor) has declined drastically soon after the recession hit the world. “This has put a positive impact on remittance as well.”
The six–month Libor rate stood at 0.25 per cent yesterday in contrast to 1.93 per cent a year ago.
“The declining fund transfer through hundi is playing a major role in retaining the upward trend of remittance,” said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.
The travel restrictions imposed by the countries compelled the hundi cartels to scale back their operation, he said.