FE Report

Billions of dollars remitted into the country every year is mainly used for personal consumption rather than investment, fuelling unnecessary imports and improper utilization of the hard-earned money, speakers said Sunday.

"Instead of creating the amount of jobs we need to alleviate poverty, remittance leads to ostentatious consumption, fueling luxury shopping," said Jamaluddin Ahmed, a council member of Institute of Chartered Accountants of Bangladesh (ICAB).

"And this shopping binge is pushing up import bill and adding pressure to the country's foreign exchange reserve. It also fuels demand-pull and cost-push inflation in sectors where supplies are inelastic, such as land price," he said.

It has been found that remittance is strongly linked with price hike in the country, said Ahmed, also treasurer of Bangladesh Economic Association (BEA).

He was presenting a key-note paper on 'economics of migrant remittance; what shapes and what shakes' at the ICAB auditorium. Ex-ICAB president KZ Islam chaired the seminar.

Bangladeshis working and living abroad last year sent home a record eight billion dollars, up from two billion in 2001. Economists and policy makers have identified remittance as the country's key driver of growth in the last five years.

Ahmed said while it's true that remittance is buttressing millions of families mostly in rural areas, sustaining their lives in times of troubles, it was not properly channellised to investment in key job-creating sectors.

BEA President Qazi Kholiquzzaman Ahmad blamed bureaucratic hurdles for the lack of proper utilization of remittance in the country.

"Beneficiaries of remittance use the money to buy lands, other consumer items and make construction. They don't have much choice to spend the money in other avenues," he said.

"Many want to invest in productive sectors but feel discouraged due to bureaucratic hassles. The government has also failed to popularise investment instruments such as bonds for the non-resident Bangladeshis," he added.

President of ICAB Nasir U Ahmed said remittance despite some of its drawbacks, remittance remains the key lever of growth and poverty alleviation in the country.

For years remittance propped up the country's foreign exchange reserves, helping Bangladesh absorb shocks in the wake of the worst global economic crisis in decades, he said.