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Remittances rise, but analyst sees risks in policy change

  • Sheikh Abu Taleb, bdnews24.com
    Published: 2022-05-25 03:15:00 BdST

bdnews24

To replenish reserves amid a global economic crisis, the government has eased rules to send remittances and get incentives, but an analyst says the relaxation may endanger the economy.

Warning of risks in changing the policy, Dr Khondaker Golam Moazzem advised the government to close the illegal channels used to send money.

Monthly remittances crossed $2 billion in April before Eid-ul-Fitr and the trend continued in May, with more than $1.31 in the first 19 days of the month, taking the foreign currency reserves to $42.32 billion as of May 18.

The reserves are enough to pay import bills of six months at the current rate, but growing costs of import with the value of the US dollar rising has prompted the government to take steps to shore up the reserves.

As part of the efforts, the government on Monday said expatriate Bangladeshis will not need to show papers to send money and get the 2.5 percent cash incentives on remittances.

The move will further boost remittances, hopes Bangladesh Bank spokesman Serajul Islam.

“In many cases, Bangladeshi migrant workers do not have banks or money transfer agents near their workplaces to send remittances. They cannot send the money through others due to the mandatory documents and rules. Moreover, they cannot show papers for overtime. These are the reasons behind the decision to ease the rules,” he said.

“Besides the easier rules, the expatriates will get more taka against the dollars they send because of the rise in dollar exchange rate,” Serajul said, expressing hope that remittances in May will cross the money sent by the expatriates in April.

But Moazzem, a research director at the Centre for Policy Dialogue, said withdrawing the requirements for papers means the money earned through any means will become legitimate after entering the country through the authorised channels.

But many may send the money abroad by using illegal channels and take them back through the authorised channels again to take advantage of the increased value of the dollar. “This is why the authorities should take steps to close the illegal channels.”

He said the government should have increased the incentives to 3 to 4 percent instead of easing the rules.

“The option is still open in the next budget,” he said, as he believes the latest measures are temporary.

The value of the dollar against the taka, however, is still rising due to a supply crunch against a high demand. The Bangladesh Bank devalued the taka for the third time in May by Tk 0.4 to Tk 87.9 per dollar on Monday.

As the low coronavirus cases bolstered economic activities, imports started increasing in mid-2021. Moreover, the importers have to pay more now with prices increasing on the international market. The rising cost of imports is putting pressure on the reserves.

Moazzem hopes remittances will continue increasing, easing pressure from the reserves, as other countries have started taking Bangladeshi workers.

In the first quarter of 2022, more than 322,000 went abroad for work. Nearly 64 percent of them travelled to Saudi Arabia.

In the first 10 months of fiscal 2022, Bangladesh received $17.3 billion in remittances.

The expatriates sent $24.77 billion in the last fiscal year, more than 6 percent of the country’s GDP.