remittance
Bangladesh Bank allows export income, remittance through MFS
Bangladesh Bank has allowed mobile financial service (MFS) providers to repatriate (conversion of foreign currency into local currency) export income and inward remittance.
All authorised dealers will provide encashment certificate to MFS providers against inward remittance, on account of information technology enabled services (ITES) exports.
In order to make it easier to receive foreign exchange, Bangladesh Bank issued a circular stating that all authorised dealers in foreign exchange and all licensed MFS providers are allowed to receive export income on account of ITES exports in association with internationally recognised OPGSPs/digital wallets and/or aggregators having operation in multiple countries.
The Foreign Exchange Policy Department of the central bank issued the notification on Wednesday and sent it to authorised dealers and MFS providers for immediate implementation.
Read more: Towards a cashless society: MFS monthly transactions cross Tk 1.11 lakh crore
The notification said that authorised dealers maintaining settlement accounts will issue encashment certificates in support of inward remittances on request from MFS providers electronically.
In this case, the request needs to be supported by auto-generated information – beneficiary’s name, wallet account number, the amount in taka, date of credit – from a remittance service provider abroad.
Based on their own screening parameters regarding the information, designated authorised dealers shall generate an electronic encashment certificate (as per enclosure A) with QR code accessible to beneficiaries through MFS providers.
Read more: MFS sector led financial transactions during Covid-19 pandemic: Nagad MD
The certificate is intended to be used for income tax purpose only.
Digital infrastructure key to attracting more remittance through legal channels, speakers say
Speakers said on Wednesday that developing convenient digital infrastructure is very vital to attract more remittance through legal channels for sustainable foreign exchange reserves.
They made the statement in a discussion on ‘Remittance through the legal channel: Prospects of digital platforms’ organised by the Economic Reporters’ Forum (ERF) at its auditorium in the capital on Wednesday.
Planning Minister MA Mannan was the chief guest on the occasion. Economists, bankers and experts made various recommendations for a better strategy to attract more remittance amid concern over dwindling stock of foreign currency.
Read more: Banks to stop charging any fees for handling remittances
Mannan said that the people in the country do not show much interest to go to banks for transactions when they receive remittance from their family members working abroad because of social and psychological factors.
Rather, they choose illegal channels to receive remittance as a quick and comfortable remedy.
He said that the government has taken initiatives for developing digital infrastructure to bridge the gap between the earners and the receivers, but it often gets protracted to reform the sector.
He also said that transactions with foreign countries are closed three days a week on the banking channels. Because of this, many people are choosing hundi as a convenient alternative, he said.
Read more: Falling exports-remittances: Double blow to Bangladesh economy
“The government wants to break these traditions and start a trend. The Ministry of Finance and the Bangladesh Bank are working on this,” he said.
Policy Research Institute (PRI) Executive Director Ahsan H. Mansur said the exchange rate of the dollar needs to be stable and balanced to increase remittances through legal channels.
“Migrant workers are more inclined to send remittances through hundi when the difference of dollar exchange rate higher in illegal channels than the legitimate way,” he said.
Managing Director of Islami Bank Bangladesh Limited Mohammed Monirul Moula said if the problem in sending money to the relatives of expatriates in the country is removed, it will be easier to deal with the existing foreign exchange and reserves crisis.
“If remittances can be sent through digital mode, it will be possible to meet the foreign exchange deficit in the next two to three months,” he said.
Read more: Remittances fall again in Oct, this time to 8-month low
Professor of the economics department of Dhaka University and chairman of SANEM Dr. Bazlul H Khandkar presented a keynote paper on the topic.
Chairman Policy Exchange of Bangladesh Masrur Riaz, Sharmin Nilormi, professor of economics, Jahangirnagar University, former executive director of Bangladesh Bank and former deputy head of BFIU Iskandar Mia, BKash Chief External and Corporate Affairs Officer Major General (retd) Sheikh Md. Monirul Islam, and economist Khondker Shakhawat Ali, among others, spoke at the function.
Bangladesh’s forex reserves now $34.3 billion, as per IMF formula it’s $26.3 billion
Bangladesh’s foreign exchange reserves is falling due to meeting import demand of essential goods and a downward trend in remittance-export incomes, the latest data of Bangladesh Bank (BB) revealed.
After paying $1.35 billion to Asian Clearing Union (ACU) as an import bill for September-October, and $131 million spent to meet LC liabilities, the forex reserves stood at $34.3 billion at the end of November 7.
BB spokesperson Md Abul Kalam Azad told UNB that the liabilities of import payment are decreasing gradually after reining in opening of import LCs.
Read more: Forex reserves still enough to cover 5 months' imports: PM
US $1.35 billion in ACU bill has been paid in September-October. Earlier, Bangladesh had to pay $1.73 billion for July-August period and $1.96 billion during May-June, he said.
The central banks and the monetary authorities of Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are currently members of the ACU.
According to the suggestion of International Monetary Fund (IMF), if $8 billion used as export development fund is excluded from the foreign exchange reserves, then the reserves stand at $26.3 billion. It is the lowest in 7 years. Forex reserves were $35.8 billion on October 30, 2022.
Read more: None can chew up forex reserve, it’s for the people: PM Hasina
Bangladesh’s foreign exchange reserves reached an all-time high of $48.06 billion in August 2021 and a record low of $42.5 million in August 1974.
Despite curbing imports, the foreign exchange reserves are falling sharply.
Opening of new LCs has been reduced. But the liability of the previously opened LCs is now payable in terms of arrears or late payment. Due to this, the dollar crisis is becoming more acute.
Read more: What are the 3 reasons behind Bangladesh’s falling forex reserves?
Bangladesh will be able to meet the import expenses of three and a half months with the current forex reserves.
Regarding the tightening of imports, economists said that forex reserves cannot be increased by stopping imports. Domestic products need some imported materials. If not, the economy will be adversely affected.
Former BB governor Dr. Salehuddin Ahmed told UNB that declining reserves are a major challenge for the economy.
Read More: How to safely send remittance to Bangladesh?
“Now we have to think about how to meet this challenge. First, we need to emphasize increasing remittances. Dollar rates should be left to the market,” he said.
Banks in Bangladesh will buy dollars at the required rate. It does not matter whether it is Tk 112 or more. It is important to raise remittance now, former governor of Bangladesh Bank Dr. Salehuddin said.
Banks to stop charging any fees for handling remittances
Banks will stop charging any fee for handling inward remittances from Monday (November 7). The decision comes at a time when remittances have been falling for two straight months, adding to the pressure on the country’s foreign exchange reserves.
It is hoped that the move can act to boost the inflow of remittances through the official channels.
Read: Falling exports-remittances: Double blow to Bangladesh economy
This decision was taken at a joint meeting of the bank’s top executives, the Association of Bankers, Bangladesh (ABB), and the Bangladesh Foreign Exchange Dealers Association (BAFEDA), held at the Sonali Bank building on Sunday.
Besides, the foreign exchange houses will be open even on weekends to facilitate remitters for sending remittances to the country. This decision will be effective from (November 7).
Read: Remittance: Bangladesh Bank tells banks to provide Tk 107 per dollar
Remittances fall again in Oct, this time to 8-month low
Inward remittances fell year-on-year for the second month in a row in October, clocking $1.52 billion - down 7.4 percent on the same month last year, according to latest figures released by Bangladesh Bank.
Remittances had dropped year-on-year by 10.84 percent to $1.54 billion in September - a 7 month low at the time. It means the October figure is now the lowest in 8 months.
Yet thanks to the strong showing in the first two months (July-August) of the current fiscal, the overall figure for the first four months of 2022-23 still remains slightly above the corresponding figure for the same period in 2021-22.
According to the latest data from the central bank, inward remittances totalled $7.19 billion in July-October of FY23, slightly edging the $7.05 billion received in the same period last year, by barely 2 percent.
Bangladesh Bank spokesperson Md Abul Kalam Azad said in order to increase inflow, the central bank has increased the exchange rate of the US dollar offered on remittances.
Read: Remittance: Bangladesh Bank tells banks to provide Tk 107 per dollar
That is on top of a 2.5 percent hassle-free incentive already in place, while several banks also provide their own additional incentives to attract foreign exchange, Azad pointed out.
These however have failed to arrest the slide in remittances witnessed since September. Before that, remittances topped $2 billion in both July ($2.09 bn) and August ($2.03 bn).
Economists have been concerned that the unofficial or hundi channels may become more active in light of Bangladesh Bank's September 12 decision to fix three different rates for the dollar - one each for remittances, exports, and imports. The October remittance figure will add to those concerns.
Read more: Sept saw 25% drop in remittance, bankers blame fixed exchange rate
Ahsan H. Mansur of the Policy Research Institute, a leading think-tank, told UNB on Tuesday that remittances are on the decline due to remitters getting better rates through the unofficial channels, whereas banks are unable to offer them more than the Bangladesh Bank-fixed Tk 107 for each dollar.
Dr Mansur has been critical of the move to adopt three different rates for the dollar from the start, and insisted on the need to return to a single interbank rate, instead of the multiple rates fixed by the central bank in cooperation with the Association of Bankers Bangladesh, and BAFEDA - the association of foreign exchange dealers.
He has always held it to be a misguided policy because it "discriminates against small remitters" - precisely the ones who would seem to be moving away from the official channels since September.
Now the noted economist does not expect to see a change for the better till remitters can be offered a more competitive exchange rate.
Even so, the central bank remains eager to induce remittances through official channels as it reels from the dollar crisis and the declining trend of forex reserves.
The reserve figure is now below $36 billion according to Shapla Chattor's own count, even as the IMF continues to insist, and most economists agree, that the globally accepted way of calculating reserves would subtract another $8 billion from that figure.
Remittance: Bangladesh Bank tells banks to provide Tk 107 per dollar
Bangladesh Bank has asked banks to provide Tk 107 per US dollar inward remittance.
A remitter will now get Tk 107 per dollar, even if they send remittance directly through banks.
Currently, remitters are getting Tk 99.5 per dollar through the banking channel. Remittance flow through banks fell drastically in September and October.
Read more: Bangladesh Bank will go slow in calculating reserves following IMF formula
Apart from this, the banks will not charge any fee for remittance collection from now on. At the same time, in the current reality of foreign exchange reserves, banks have to open LCs with dollar resources from their own sources, Bangladesh Bank said to the commercial banks
These instructions were given on Monday (October 31, 2022) in a meeting between the central bank and the Association of Bankers, Bangladesh (ABB), an association of banks' chief executives, and the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA)
Deputy Governor Ahmed Jamal and Kazi Sayedur Rahman were present at the meeting.
Read more: Bangladesh Bank asks banks to stop ACU transactions with Sri Lanka
ABB Chairman and BRAC Bank Managing Director (MD) Salim RF Hossain, on behalf of the banks, BAFEDA Chairman and Sonali Bank MD Afzal Karim, Mutual Trust Bank MD Syed Mahbubur Rahman, City Bank MD Masrur Arefin and others were present.
Besides, the central bank has asked to increase the number of exchange houses outside the country to encourage remittance collection directly through banks by reducing the dependence on foreign exchange houses. In this case, the central bank will provide the necessary assistance.
Banks have committed to implementing these decisions.
Read More: How to safely send remittance to Bangladesh?
What are the 3 reasons behind Bangladesh’s falling forex reserves?
Despite curbing imports, Bangladesh’s foreign exchange reserve fell to USD 36 billion – the lowest in 28 months – due to 3 reasons, economists believe.
The reasons are an imbalance in export-import, high dependency on imported oil and gas, and decreasing trend in inward remittance flow.
The forex reserves stood at USD 35.98 billion on Wednesday, according to data from Bangladesh Bank. The country’s reserve was USD 46.19 billion a year ago (October 19, 2021).
Read: Forex market may be more volatile unless reforms are done
Former governor of Bangladesh Bank, Dr Salehuddin Ahmed, told UNB, increasing the flow of inward remittance and curtailing import liabilities are ways to secure forex reserves, as exports are facing a slump due to the Russia-Ukraine war.
Despite increasing the cash incentives to 2.5 percent from 2 percent in the current fiscal year (2022-23), the inward flow of remittance saw a fall of 25 percent in September compared to August.
Bangladesh is receiving an average of USD 59.22 million inward remittance per day in the current month through banking channels which was USD 76.66 million in July.
Read: Bangladesh’s forex reserves now $36.90 billion
The fiscal year started with a growth trend of inward remittance while the country received USD 2.09 billion in July and USD 2.03 billion in August. But remittance fell to USD 1.54 billion in September.
Dr Abdur Razzaq, a trade expert and a former researcher of WTO, said overall exports of Bangladesh have declined by 6.25 percent in the last month, mainly due to a decline in apparel exports.
The export of readymade garments was worth USD 3.16 billion in the previous month, which is 7.52 percent lower than in September last year. Export of both woven and knit garments declined last month, he said.
Read Market-based foreign exchange rate may be introduced soon
Exporters of readymade garments have said that inflation in the USA and EU countries has become severe due to the Russia-Ukraine war. People there have cut back on purchases other than fuel and groceries.
Because the foreign buyers have reduced new purchase orders, some companies were not allowing shipment even after the products were ready, sector insiders said.
Higher dependency on importing oil and LNG gas, directly and indirectly, affected the foreign exchange reserves. The foreign exchange payment liabilities have been surging due to increasing oil and gas prices in the global markets.
Read Explainer: What it means to let taka float
Bangladesh received $357.76mn remittance in first week of Oct
Bangladesh has received USD 357.76 million remittance in the first week of October (2-6), Bangladesh Bank data shows.
Despite hiking cash incentive to 2.5 percent, from 2 percent, in the current fiscal year (2022-23), the inward flow of remittance saw a fall in September. This trend remains so far in October.
Bangladeshi expatriates sent inward remittance of USD 1.54 billion in September, which is the lowest in last 7 months.
After a decline in September, remittance is showing slow pace in October as well. In the first six days of the current month, expatriate income or remittance worth USD 357.7 million came to Bangladesh, said a Bangladesh Bank official.
Bangladesh is receiving, so far, an average of USD 60 million remittance per day through banking channels. If this current trend continues, USD 1.80 billion remittance will be received by the end of this month, the official said.
The fiscal year started with a growth trend in inward remittance while the country received USD 2.09 billion remittance in July and USD 2.03 billion in August. But it fell in September.
Financial sector insiders believe that expatriate prefers Hundi for inward remittance as the exchange rate of the US dollar is Tk 8 to 14 higher in the kerb market.
Remittance fell in Sep due to exchange rate volatility: Bangladesh Bank
Bangladesh Bank spokesperson Md. Serajul Islam on Tuesday blamed the extreme volatility in the forex market in recent months on the global strength of the dollar against almost all currencies.
“Not only in Bangladesh but also in neighboring countries, the price of the US dollar has increased. In many South Asian countries, it is higher than it is in Bangladesh,” he said.
Serajul Islam, also executive director of the BB, said this in a briefing for a group of reporters on decreasing remittances and export earnings in the last month.
The inward remittance flow in September may have fallen due to the situation over the exchange rate, with a significant volume being diverted to the kerb market in search of a higher rate for the dollar, he believed.
Year on year, Bangladesh's inward remittances dropped by 10.84 percent to $1.54 billion in September, the third month of the 2022-2023 fiscal, from $1.72 billion in the same month last year. It was the lowest inflow of remittances in 7 months.
The drop was even steeper, almost 25 percent, in comparison to the previous month (August 2022).
It followed a decision by banks on September 11 to pay a maximum of Tk 108 for each dollar to foreign exchange houses (like MoneyGram and Western Union, through which most expats send money). Prior to that, they had offered exchange houses up to Tk 115 for a dollar.
The Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealer’s Association (BAFEDA) were tasked to come up with the rate by the central bank, as an alternative to Bangladesh Bank frequently intervening in the market to set the rate, usually by selling dollars to support an artificially overvalued rate for taka.
Read: Sept saw 25% drop in remittance, bankers blame fixed exchange rate
But the “strongest dollar in a generation”, witnessed over the last year or so and likely to persist well into the foreseeable future, was starting to make the prevailing system very expensive to maintain for Shapla Chattor. The new system, meanwhile, would seem to be still going through 'teething problems.'
Serajul Islam however said today that the price of the US dollar "is normalizing with the initiative of the central bank".
"Bangladesh Bank should not provide any dollar support to the market. BAFEDA and ABB are also playing a role in overcoming the dollar crisis. Currently, the volatility of the dollar has also decreased somewhat," he said.
The spokesperson said Bangladesh has to emphasize this issue by increasing export income.
“To that end, businessmen have to work to establish Bangladesh as a brand in the global market. If we can do this, this crisis will end quickly,” he added.
Sept saw 25% drop in remittance, bankers blame fixed exchange rate
Bangladesh received inward remittance of USD 1.54 billion in September — a 25 percent drop compared to August’s remittance.
According to latest data from Bangladesh Bank, the country received USD 2.03 billion inward remittance in August, while 1.54 billion was received in September. In July 2022, Bangladesh received inward remittance of 2.09 billion.
Remittance dropped to a seven-month low in September as the central bank fixed the dollar exchange rate for inward remittance.
Bankers said the downfall happened after, on the advice of the central bank on September 12, the banks fixed the dollar exchange rate for remittances at Tk 108.
Financial sector insiders and experts have said that the cost of living for expatriates increased due to global inflation. Additionally, they prefer hundi over legal remittance channels as they are getting Tk 5-6 per dollar more than the bank exchange rate.
Bankers had initially feared that remittances may decrease due to fixing the exchange rate.
The exchange houses said that the remittances came in less in the first week after the rate was fixed as remitters could not be given higher rates.
At present remittance through hundi yields Tk 113-114 per dollar. Due to the fixed exchange rate at banks, the difference between the dollar price of hundi and the banking channel is at least Tk 6-7.