Remitters raise use of informal channels

Dhaka,  Tue,  26 September 2017
Published : 28 Nov 2016, 00:03:22

Remitters raise use of informal channels

Remitters raise use of informal channels
Jasim Uddin Haroon

Expatriates have recently increased the use of informal channels, for sending money back home for higher exchange gains, causing a notable fall in official remittance inflow.

The government has identified this switch as a key reason for the decline in remittance inflow in recent times.

Analysts view that the spread between the formal and informal channels widened recently following high demand for the dollar on "different grounds".

They said the demand for the greenback is surging due to informal trade with a neighbouring country and possible rise in capital flight.

The Ministry of Finance in its quarterly review states that the remittance inflow dropped by 15.43 per cent to US$4.25 billion in July-September period. It was $5.032 billion during the corresponding period of last fiscal year.

It noticed a paradox: overseas employment soared during six months ending June 2016 but remittances stood low.

The official document says nearly 60 per cent of the remittance inflow usually comes from six Middle-eastern countries: Saudi Arabia, the United Arab Emirates, Oman, Qatar, Kuwait and Bahrain.

"The employment in the six countries grew by 58.8 per cent but earrings in terms of inflow fell by nearly 11 per cent," the official document says.

It also shows that the earnings from outside of the ME countries have grown to some extent.

A senior person familiar with the developments told the FE that remittance inflow from the USA fell despite the fact that the US job market had grown much higher than expected in recent months.

More people returned to the US market to look for work amid a record number of positions being available. The labour-force-participation rate, which gauges this activity, rose to 62.9 per cent.

The US economy added 156,000 jobs in September, and the unemployment rate unexpectedly ticked up, according to data released by the Bureau of Labour Statistics.

"The remittance from the US has fallen by 17.6 per cent during the period under review," the official said.

On the other hand, the earnings from the United Kingdom also fell by 5.5 per cent during the period under review.

The local currency, taka, remained slightly depreciated at the end of September 2016 from that of September 2015 which also failed to boost the remittance figures.

The local currency remained depreciated by 0.77 per cent at the end of September last over its corresponding period.

Biru Paksha Paul, chief economist at the central bank, told the FE that he also sees the informal channels now active.

"I don't find otherwise any reason for such significant drop [remittances]," Mr Paul said.

He said the recent ban on high-value currency notes in India is also pushing the demand for the dollar as many travellers are carrying dollars instead of Indian rupees.

The BB chief economist, however, ruled out the possibility of any challenges the central bank could face under such situation in terms of balance of payments.  

Dr. Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, also finds the demand for dollar soaring.

He cited two reasons: to meet the demand for dollar by a section of unscrupulous traders for informal trade with India and capital flights.

"To my mind, these are the two key reasons for the sudden fall in remittances," Dr. Mansur said.
Editor : A.H.M Moazzem Hossain
Published by the Editor for International Publications Limited from Tropicana Tower (4th floor), 45, Topkhana Road, GPO Box : 2526 Dhaka- 1000 and printed by him from City Publishing House Ltd., 1 RK Mission Road, Dhaka-1000.
Telephone : PABX : 9553550 (Hunting), 9513814, 7172017 and 7172012 Fax : 880-2-9567049
Email :,
Copyright © 2017. All rights reserved
Powered by : orangebdlogo