Inward remittances have become an important component of the Bangladesh’s economy over the years. Bangladesh is among the top ten recipients of remittances in the world. Remittance as a percentage of GDP has increased from 6% in FY2004 to 11.4% in FY2010. Remittance inflow has been the backbone, providing support to the international reserves of the country. Historically, most of the remittance inflow comes from the Middle East and overall, the remittance from the Middle East constitutes about 66% of total remittance received by the country. Most of the remittance inflow comes from the Middle East – mainly Saudi Arabia (30%), UAE (17%) and Kuwait (9%). Other major sources of remittance include USA (14%), UK (8%) and Malaysia (6%). Remittance growth has been quite poor in recent times, with the growth slowing down in the post global crisis regime.
Bangladeshis working abroad sent home a record over US$ 11.50 billion in the just concluded fiscal year despite the ongoing crisis in the Middle Eastern (ME) countries. According to the Bangladesh Bank, although the country's inward remittances increased, its growth continued to show a downward trend in the last couple of years because of lower volume of manpower export. Remittances sent by Bangladeshis working abroad reached $11.649 billion, a record in the country's history, in 2010-11 (FY11), marking a 6.03 per cent growth over the previous fiscal. The flow of inward remittance in FY11 was a continuation of the trend in the last fiscal year, when the country received a record $10.987 billion. However, the manpower export decreased by over 17 per cent to 383,150 in 2010 from 465,351 in the previous calendar year, according to official figures. The last available official figures suggest that the country’s foreign exchange reserve stood at $10.90 billion.
The central bank of Bangladesh has been continuously taking a series of measures to encourage expatriate Bangladeshis to send their hard earned money through formal banking channel instead of the illegal 'hundi' system to boost the country's foreign exchange reserves. Even some of the private banks have been aggressively pushing to channel the remittances from the Middle East, the United Kingdom, Malaysia, Singapore, Italy and the United States to Bangladesh.
On the backdrop of the crisis in the Middle East, particularly Libya, such trends may seem worrying. However, increased recruitment of Bangladeshis by Saudi Arabia and possibility of higher petroleum prices leading to growth in the Middle Eastern countries is worrying for the country’s GDP health, but the recent rise in crude oil prices at international level could be one of the advantages, supporting the resumption of inward remittances in large scale in the long term.
Given that remittance is a large part of Bangladesh’s GDP, recent trends in its inflows are concerning. Moreover, remittance has long been the cushion against high imports that contributed immensely to sustaining the international reserves. Both these variables have started to dwindle recently, with the current account balance delving into negative territory after quite some time.
The rise in exports, which grew by close to 40% in the FY11would provide support to the current account and international reserves. However, steps need to be taken to boost and sustain inward remittance as well, which has started to show a slow rate of growth year after year over the past three fiscals.