Remittance inflow in fiscal 2016-17 has been the lowest in six years — a development that can be viewed as a dark cloud over an otherwise buoyant economy.
Migrant workers sent home $12.77 billion last fiscal year, down 14.47 percent year-on-year, according to data from the central bank.
Remittance is a major source of foreign currency for Bangladesh and the declining trend since fiscal 2015-16 has progressively become a matter of concern for the government.
The inflows were lower every month save for May last fiscal year. In June, $1.21 billion flew in, down 17 percent from a year earlier.
The International Monetary Fund last month cited the declining remittance as a risk factor to the economy.
Over the last 10 years, remittances accounted for 8.5 percent of the country’s gross domestic product on average, close to eight times the foreign direct investment flow into Bangladesh, according to the IMF.
The slump was due to persistent weaknesses in the Gulf Cooperation Council economies, where the majority of the migrant workers reside, as a result of the low oil prices, said Zahid Hussain, lead economist of the World Bank’s Dhaka office.
The rising negative sentiment against immigrant workers in the US and the UK, cautiousness in international money transfer operations and the large divergence between formal and informal rates in the foreign exchange market also played a part.
Another reason for the decline in official remittance figure, while difficult to measure, could be related to a shift away from banking towards informal channels for transferring funds, according to the IMF.
The direct impact of the remittance slump is on the external current account deficit, where a large deficit has emerged after several years of surplus, leading to slower reserve accumulation with reduction in the size of overall balance of payment surplus, Hussain said.
“On the flip side, this reduces pressure on the Bangladesh Bank for conducting sterilisation operations.”
The disposal income growth of low- and middle-income people is adversely affected by the remittance slump too, leading to weakening of consumer spending — a significant driver of growth in rural economy and urban real estate sector.
“Deposit growth in banks is adversely affected. This may not be felt that acutely in the current environment of excess liquidity, but it is not good news for financial deepening,” he added.
Source: New Age