Despite a sharp increase in the outflow of migrant workers, remittances to Bangladesh fell 11% year-on-year to $1.54 billion in September, the lowest in seven months.
Bankers say the uniform exchange rate set by banks for remittances, a move that has brought some stability to the foreign exchange market, may have had a negative effect on the inflow of the source of U.S. dollars the cheaper for the country.
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On August 11, banks decided to pay a maximum of Tk 108 for every dollar at money changers (like MoneyGram and Western Union). Before that, they offered exchange houses up to Tk 115 per dollar.
In accordance with the decision, no bank offers more than 108 Tk for one dollar to exchange offices and 99 Tk to buy the greenback from exporters. Overseas Bangladeshis usually send money to recipients’ bank accounts through money changers.
The September remittance figure was also a 24.4% drop from the previous month. However, remittances rose 5% year-on-year to $5.67 billion in the first quarter of the current fiscal year, which started in July.
The bad show in the remittance sector came despite the fact that 7.84 lakh migrant workers left the country for overseas jobs in the first eight months of 2022. The figure was 6.17 lakh in 2021 and 2.17 lakh in 2020, according to data from the Manpower Employment and Training Bureau. .
A Bangladesh Bank official said the drop in remittances could intensify pressure on the government and central bank as the country struggles to manage its macroeconomic stability due to rising inflation and the shortage of US dollars.
The decline has already hurt foreign exchange reserves, which stood at $36.44 billion on September 28, down 6.7% from August 31. If the downward trend continues, volatility in the forex market will intensify.
The local currency has lost its value by at least 25% against the US dollar over the past year.
The foreign exchange market has faced volatility for months as import bills soared amid escalating commodity costs. This prompted both the Bangladesh Bankers Association, a platform for chief executives of banks, and the Bangladesh Foreign Exchange Dealer’s Association, an organization dedicated to implementing foreign exchange policies in the market, to set uniform exchange rates.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said uniform exchange rates could have had a negative impact on remittances.
Emranul Huq, managing director of Dhaka Bank, echoed Mahbubur.
He added: “The exchange houses may not have released the money immediately so that the forex market faced increased volatility and they could take advantage of the situation.”