The significant fall in remittances through official channels in 2016, compared to previous years, has worried the government policy-makers, particularly the Ministry of Expatriates Welfare and Overseas Employment, which is responsible for overseeing and managing foreign employment, and the Bangladesh Bank (BB). These worries are not misplaced since remittances constitute one of the significant sources of hard currency earnings for Bangladesh and are equivalent to about 8.0 per cent of the country's Gross Domestic Product (GDP).
If we take statistics of the past five years from 2012 to 2016, the number of people going abroad have increased steadily while remittance trends do not show commensurate and proportionate responses. On the contrary, remittances in 2016 declined by almost 11 per cent compared to that of 2015 but the number of people going abroad with jobs between 2015 and 2016 increased by 36 per cent i.e. from 555,881 persons in 2015 to 757,731 in 2016. On one hand, inflow of remittances recorded in 2016 was US$13.61 billion which was the lowest of the past five years, on the other, the number of people going abroad in 2016 was the highest during the past five-year period (Box on overseas employment trends).
The figures, however, are contradictory and show puzzling trends. Naturally, the Bangladesh government cannot remain complacent to this development. In response to these trends, the BB officials, economists and financial experts, government officials, businessmen and bankers have found several possible causes of such a decline in remittances. Their views have been expressed in various important forums and meetings.
The reasons put forward for declining remittances include, among other factors, falling income of Bangladeshis due to declining oil prices in the receiving countries as well as sharp increase in channeling of remittances through informal means like 'hundi'. It is assumed that one of the reasons for the latter was significant difference in the Taka-Dollar exchange rate between official and unofficial (or kerb market) rates. Even the scheduled banks charge an unjustifiably high margin between selling and buying rates of foreign currency. This, no doubt, works as another disincentive of using official channels. Can something be done about this?
As an immediate response, the BB officials have accused mobile banking channels of being one of the culprits and have thus slapped some restrictions on mobile banking transactions such as lowering of limit on frequency of transactions as well as single transactions.
In addition, it is understood from newspaper reports that the BB has already set up a team to work on this matter and to find out the reasons for the declining remittances and suggest corrective measures. As a part of this, the team is likely to visit some of the labour-receiving countries having a large number of expatriate workers from Bangladesh. It is still too early to say whether these measures are sufficient or not.
Needless to mention, it is a natural human response to be attracted by cheaper and hassle-free economic transactions. If it is cheaper and easier to send money through unofficial or informal channels, then people will tend to be more attracted by such routes. But counter-measures should be in place offering real incentives to millions working abroad to use official channels for sending money back home.
What's about reducing the difference of Taka-Dollar exchange rates in official and kerb markets? What's about lowering of the margin between buying and selling rates of foreign currency? The Ministry of Expatriates Welfare and Overseas Employment and the Bangladesh Bank should take effective measures to address some of the issues mentioned above. The chances are that sound and well-thought-out measures will persuade Bangladeshi expatriates to avoid using unofficial or informal remittance channels like hundi. Finally, the result of the governmental measures will be known over the coming months. So, let us keep our fingers crossed.
The writer is a former ILO official and currently a freelance consultant.