RemittancesGateway.org

Fall in remittance inflow worries Bangladesh govt.

Tuesday, 21 June 2011 13:56

Source: Gulf Times

The Bangladesh government has expressed concern over decline in inward remittance flow, and has set an 11-point measure, including issuance of bonds and proposal for a welfare fund, for returning workers.

Inward remittance growth fell in May, mainly due to the ongoing unrest in the Middle East and North Africa, which has sent back thousands of migrant workers in the past few months.

“The decline in remittance inflow is a matter of concern, because it plays an important role in balance of payment, and, finally, in macro-economic stability,” a letter, issued by the ministry to the ministries noted.

In May, migrant workers remitted $993.25mn, down from $ 1.97bn a month back, registering a 0.9% fall.

Remittances, however, grew 9.9% in May, compared to the same month last year, when it was $903.05mn, according to central Bangladesh Bank statistics, released in Dhaka yesterday.

The ministry has asked the central bank to reduce the gap between inter-bank and open-market currency rates, and to reduce real appreciation of exchange rate.
It also asked the central, commercial banks and other financial institutions to set more currency exchange houses at source countries, simplifying money drawing arrangements, and to reduce transfer fee and exchange rate margins.

The finance ministry has asked the treasury and loan management department to take immediate steps to launch a diaspora bond under Bangladesh Infrastructure Finance Fund Ld (BIFFL).

The Board of Investment (BoI) is also being asked to offer Non-Resident Bangladeshis (NRB) the same incentives to equity investment, which it offers to foreign investors.

It asked the foreign ministry to immediately take steps to send construction workers to the UAE, Kingdom of Saudi Arabia (KSA) and Qatar, as these countries will recruit thousands of workers for infrastructure development for 2018 football world cup.

Remittance growth in the first 11 months of the current fiscal year stood at 5.06%. During the July-May period, Bangladesh received $10.6bn in remittances, up from $10.09bn in the same period, during the previous fiscal year.

Remittance growth started slowing down due to a significant decrease in the net outflow of migrant workers over the past year-and-a-half. The number of workers going abroad, in the first 11 months, dropped 10.9%, compared to the same period, last year.

Also, a number of migrant workers returned home, following political unrest in Arab nations, such as, Egypt, Libya, Bahrain and Yemen.

The number of outgoing workers also dropped, as some countries have stopped fresh recruitments from Bangladesh, the finance ministry official added.
“We need to look for new destinations, like Latin American, African and European countries,” he said, adding that training the workers is necessary to tap European markets.

Mustafizur Rahman, executive director, Centre for Policy Dialogue, said, a number of issues, including gender and skill-mix of migrant workers, cost of migration and the crisis in Middle East and North Africa (MENA), have emerged as major concerns in recent times.

The government should undertake a careful investigation whether this crisis will have any significant adverse impact on Bangladesh labour exports and remittance earnings, he added.

He also suggested immediate measures to finalise the proposed comprehensive migration policy, the Overseas Employment Act 2011, and to ensure strict compliance with the provisions by the recruitment agencies.

The decline in remittance growth has put a pressure on balance of payments. In the first seven months of the current fiscal year, current account balance surplus has dropped 79%, compared to the same period of the last fiscal year.

The decline in remittance growth may create pressure on the foreign exchange reserve. Foreign currency reserves stood at $10.64bn yesterday, which is equivalent to the import bill of three-and-half months, officials feared.

Besides, due to the pressure on the balance of payment, the value of Bangladesh currency taka is under pressure, and it is getting devalued everyday. As a result, import costs are increasing, making inflation rise.