Policy measures needed for increasing remittance flow: Experts

New policy measures are needed to increase remittances inflow through legal channels, said experts.

One of the reasons for the drop in remittances despite the increase in the number of migrant workers is that many expatriates do not send money to the country through legal channels, said Dr Ahmed Munirus Saleheen, secretary of expatriates' welfare and overseas employment ministry, at a press conference yesterday at the ministry on the occasion of the International Migrants Day 2022.

Another reason for the drop in remittances despite the increase in the number of expatriates is that they cannot start sending money immediately after reaching the destination countries, he said.

"The Bangladesh Bank has taken some initiatives to encourage sending money through legal channels. We also expect some new policy measures in this regard," he said.

In response to a journalist's question, Dr Saleheen said the Bangladesh Bank has provided an exchange rate waiver, which is implemented only by the Bangladeshi banks operating abroad. It is not applicable to any exchange house. Besides, foreign financial institutions would not allow sending remittances without a cost.

"We have urged the Bangladesh Bank to reduce the differences among the exchange rates offered by financial institutions and the kerb market," said Dr Saleheen.

He also said it has been made mandatory to have a bank account to go abroad with a job as there is a close link with the bank account to send remittances through legitimate channels. A migrant worker can open an account in his own name as well as in the name of his family members.

Asked about allegations that the recruiting agencies charge the aspiring migrants more than the rate fixed by the government, Dr Saleheen said, "I have seen reports about it in the news. We are working to identify these agencies. However, no worker has complained to us yet regarding the matter. It is a challenge for us to solve it."

A managing director of a private bank told TBS that the expatriates' get Tk107 per dollar along with a 2.5% incentive for sending remittances through legal channels, while they get Tk115-120 per dollar for laundering money to the country through hundi. As a result, the migrant workers are leaning towards hundi.

Existing measures ineffective for remittance increase, say experts

The Bangladesh Bank's supportive policies like higher exchange rate, 2.5% cash incentives, waiver of bank charges, and allowing higher forex retention appear to be ineffective, said Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), while presenting a paper on "Managing the Economic Crisis, CPD's policy Recommendations" at a programme at the Brac Centre Inn in Dhaka yesterday.

According to the report, the remittance flow came down by more than half a billion dollars in the first five months of FY23 compared to the corresponding period of FY22.

There is a need for a deeper investigation of the factors driving the decrease in remittance flows from the Middle Eastern countries, said the report.

In all likelihood, the significant difference between formal and informal channel (hundi, howla) exchange rates may have created an incentive for the transfer of flows from formal to informal channels.

It is reckoned that the recent rise in the exchange rate for remittances plus the 2.5% cash incentive have significantly reduced the margin between formal exchange rate and the kerb market rate in Bangladesh. To what extent the difference with informal channels still persists, remains an issue of speculation, although the margin must have reduced significantly following the recent adjustment in the effective exchange rates for remittances (about Tk110 per dollar).

The Bangladesh Bank will need to keep the emergent scenario under constant monitoring and vigilance and both exchange rate management and enforcement of relevant laws must inform its actions in this regard.