Rejaul Karim Byron

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The remittance flow is losing its momentum as the exchange rate of the dollar against the taka has gone up in the informal market, Bangladesh Bank said in a report.

Among other causes of the diminishing flow, the report cited low interest rates in case of expatriates investing their money in various savings instruments.

As per the decision of the central bank board of directors, the causes of plummeting remittance were identified.

In fiscal 2008-09 the remittance growth was about 22 percent, which came down to 13 percent last fiscal year.

In the first few months of the current fiscal year, the growth was negative. Although the amount has marked a slight increase recently, it is still below 4 percent in the nine months of the current fiscal year.

The central bank report said the unofficial exchange rates are higher than the official rates in an import-dependent country like Bangladesh. So the remittance inflows through illegal channels are high.

The central bank said the huge difference -- almost Tk 4 -- between official and unofficial rate during May 2010 to November 2010 had a negative impact on the remittance flow. Ideally the difference is around Tk 1.

The BB in its study said, from May 2010 unofficial exchange rate of the dollar was on the rise and it crossed Tk 73 against the taka. The official rate was slightly over Tk 69.

The report said the remittance inflow slowed down as the rate of interest was slashed in different savings instruments, including wage earner development bond, and due to the imposition of tax at source.

From July 2010, the rate of interest on wage earner development bond was lowered from 12 percent to 10.5 percent.

From July to February in the current fiscal year, the investments in wage earner development bond stood at 0.95 percent of the total remittance which was 1.5 percent during the same period last fiscal year.

During the recession, people's trust in banks and financial institutions throughout the world sagged and the expatriates send their earnings instead of depositing with the banks and financial institutions there.

However, the BB found no link between the fall in manpower exports and the slow pace of remittance inflow.

The report said the government has data of Bangladeshi nationals going abroad for job but the exact information on their income is not available. However, general observation is that if the manpower exports slow down, and expatriates come back from some countries, and it deals a negative blow on remittance, the BB report said.

The central bank has made a number of recommendations to increase remittances, including the introduction of pound and euro bonds alongside the dollar bonds. The foreign currency bond has achieved much popularity and is playing a role in increasing remittance.

Alongside increasing manpower exports to the existing labour markets, new markets should be explored, the BB said. Manpower exports to some African countries like Algeria, Angola, Nigeria, Botswana, and South Africa have started but the process needs to be expedited, it said.

Knowledge of language is very important for workers holding jobs abroad. Bangladeshi workers are lagging behind the Indian, Sri Lankan and Nepali workers in the labour market due to their inadequate language skills. Alongside work, training on language should be given equal importance.

As sending workers abroad is costly now, the government should take necessary steps for keeping the migration costs at logical level, the central bank said.

The BB disagreed with some experts' apprehension that remittance inflow will fall due to the political turmoil in Egypt, Libya and some other Middle East countries and natural disaster in Japan.

The central bank said the remittances from these countries were very small. However, projecting a bright prospect it said, due to a hike in oil prices on the international market, the economy of the Middle East has the prospect of being buoyed. On the other hand, the ME countries have been announcing different incentive packages to calm down the political flare.

The BB said, due to increasing development works the wage of the workers and their demand will increase.

Taking into consideration that the economies of the US and the UK are also likely to improve, Bangladesh economy will grow faster, the BB report said.

News: The Independenty Sun/Bangladesh/17-Apr-2011