Remittance and Foreign Reserve of Bangladesh

Remittance is a much talked term in the economy of our country. Now our GDP directly relates to the remittance. The expression 'remittance' means a foreign currency earned as wages by our people living in the foreign land for the time being. Remittance is a transfer of money by a foreign worker to his/her home country. It contributes to the livelihood of people world wide. Again, it promotes access to financial services for the sender and recipient in various countries of the world there is a great demand of Bangladesh wage earners. The reasons behind this are many; hardworking attitude of our work- ers, cheap labour, somewhat poverty in Bangladesh and the so forth. Remittance works as the foreign reserve for a country. Sometimes, the gov- ernment uses the remitted money as a means of banking transaction. At times, the government disburses loan to the poor from the remitted money. In fact, the govt. can handle the money for the time being and meanwhile it can earn money. Again, the govt. gets some tax on the remitted amount. Above all, remittance is a means of foreign reserve as well as foreign income on the part of a country. Therefore, the importance of remittance cannot be denied anyhow.

Remittance is not a new phenomenon in the world though it is a normal concomitant to migration which has always been a part of human history. Several European countries like Spain, Italy etc. were heavily dependent on remittance received from their emigrants during 19th and 20th centuries. In the case of Spain, remittances amounted to the 21% of all of its current account income in 1946. Spain was the first country to sign an international treaty with Argentina in 1960 to lower the cost of the remittances received. Notable that Italy was the first country in the world to enact a law to protect remittances received. Now India is the first remittance holder in the world and China has taken the second place.

According to the Bureau upto December, 2017, migration of more than 10 mil- lion Bangladeshi for jobs has increased rapidly since workers are working in 143 countries across the world. Of them 80% are working in Saudi Arabia, Malaysia, Kuwait, Qatar, Jordan, Oman, UAE, Bahrain and Lebanon. The rest are working in Egypt, Brunei, Darussalam, Libya, South Korea, Japan and oth ers. The country received 853.73 USD million remittance in September, 2017 from nonresident Bangladeshis. The remittance, earned in September, 2017, was 39.8% lower than that of September the previous year. The Central Bank figures showed that during the fiscal year Sept. 2016-17, Bangladesh received their highest remittance of $1478.4 million from Saudi Arabia followed by 2002.63 million from UAE, $1328.7 million from Oman, $568.2 million from Qatar, $359.7 million from Bahrain and $255.6 million from Libya where for political turmoil the supply of manpower from Bangladesh is now forbidden from our side. In the same way, the political situation in Egypt and Oman is hazardous as well. In these two countries a disorder is going on for the proper transition of power. Again, for Middle-East crisis manpower sending from Bangladesh has been unpropitious in comparison to the past. Consequently, a decline in remittance is being visible in recent times.

Bangladesh is the eight highest remittance earning country in the world and remittance is the second largest sector in the country. Here remittances have emerged as a key driver of economic growth and poverty reduction.

It is reasonable to mention that in our country like many other developing countries foreign aid and remittance inflow have become two major factors in creating reserve balance. Among the developing countries Bangladesh holds the fifth position with regard to earning remittance. To make this statement believable some figures of amount represented before are a concrete proof of it.

Remittance is indissolubly linked with the development of a country, no doubt. Each and every remitter who is in the foreign country brings about his person- al development, and with his development his homeland is also developed. In other words, remittance income does not benefit just individual recipients, it also benefits the local and national economies in which they live.

Indeed, the spending allowed by remittances has a multiplied effect on local economies as funds, subsequently spent, creates incomes for other, and stimulates economic activity generally. Of course, beyond such multiplying effect, however, are other factors, conducive to economic growth and stability. Remittance also helps Bangladesh in making the balance of payments favorable, and makes up the deficit between total export and import.

A WB (World Bank) analysis said

Remittances can provide receiving countries with much needed foreign exchange. Remittance is a more stable and reliable form of foreign earnings in many developing countries than either FDI (Foreign Direct Investment) or aid flow, and helps alleviate the balance of payments and debt crises that are often a characteristic of such countries. In this sense, they are also a potentially stabilising factor for national currencies and can provide developing countries with lower borrowing costs by presenting them with a stable flow of foreign exchange collateral. 

Technical and financial support from the ILO (International Labour Organisation) and memorandum of under- standings (MOUs) between Bangladesh and the destination countries of the migrants should be south for the increase in remittance. The MOUs can con- tain basic rights such as monthly full wages and safe working conditions.

Remittance, as mentioned in the beginning, has a great impact on foreign reserves as well. It is one of the mainstreams of foreign reserves in Bangladesh. But in recent times, according to some sources, slowdown in remittance has adversely affected the country's foreign reserves. For the first time since the independence of Bangladesh country's foreign exchange reserve has dropped down below US $10 billion. Average foreign currency reserves were US $10.75 billion in 2009-10 fiscal and US $10.91 billion in the fiscal 2010-11. In March, 2011, the reserves hit US $11.32 billion, the highest in the country's history. A country needs foreign reserves mainly for two reasons such as (i) to synchronize its receipts and payments with the rest of the world and (ii) to withstand occasional speculative raid by the dealers in the foreign exchange market. IMF has projected that Bangladesh's foreign currency reserves may fall by $1 billion by the end of the current fiscal year mainly because of increased spending on oil import.

Following the running crisis most of the experts are suggesting the government to suspend all heavy budget projects in order to allow country's economy to get into a better situation. But the curtailment of budget is not enough for the remedial of such gigantic problem. Budget curtailment is one of the many ways of overcoming the present crisis. Remittance flow is a must to be boosted in the country and for the increase in remittance all the concerned authorities related to manpower must be alert to find a fruitful way out. No doubt, remittance is one of the chief sources of foreign income on the part of Bangladesh. Next to the garment industries remit- tance brings about foreign currency substituting the country's deficit as subsidy to a great extent. Therefore, remittance flow must be kept unhindered, and the flow should be made speedy for developing our promising country. To abate the crisis in foreign reserve a smooth remittance flow is a potential panacea nowadays. It is also undeniable that in a developing country like ours, remittance can function as a functionary of overall development instrument. Furthermore, govt. has to go on trying to send more manpower to the western developed countries like USA, Canada, England, France etc. for more remittance in our developing land.