Remittance during Covid-19 epidemic : Claw in the economy of Bangladesh

Remittance has become major contributor in our country’s economy. After gigantic textile industry, it is the second-largest source of foreign earnings of our country. It plays a critical role in our socioeconomic development. But the Covid-19 pandemic has Impacted Bangladeshi migrants abroad, which ascendence to the flow of remittance. Now we will see how Covid-19 epidemic has affected our country’s remittance and what steps have been taken by our government. At first we will have a clear concept about remittance.

What is remittance?

Remittance means transfer of money, often by a foreign worker to a loved on in his/her home country. This term is derived from the word “remit”, which means to send back. Then question comes, is it a recent phenomenon? No, Remittance is not a 21st century phenomenon. It dates back to the industrial revolution when farmers and workers started moving to bigger cities in search of employment. They would often send money to their families. From then remittance continues to help families around the world. Types of remittance :

Outside remittance : when expatriates send money to their home country then it is called outward remittance.

Inward remittance : The process of receiving this money by the expat’s family called inward remittance.

System of Remittance sending :

Formal system : In this system remittance is sent formally which includes demand draft, traveller’s check, telegraphic transfer, postal order, direct transfer, Automatic Teller Machine etc.

Informal system : Hundi or money carrier system is most popular as informal processes of remittance sending. It is the absence of any transaction charges.

Impact of remittance in Bangladesh economy :

Remittance has emerged as a key driver of economic growth and poverty reduction in Bangladesh. In the late 1980s and 1990s the economic boom in the southeast countries has generated demand for unskilled and semi-skilled workers. At that time Bangladesh had taken advantage of economic growth and prosperity in those countries. These flows of migrants leaving the country have fulfilled as a means of easing unemployment pressure on Bangladesh and also remittance received from the migrant workers have had significant impact on the socio-economic development. As estimated 10million Bangladeshis are working abroad who sent close to $18 billion in 2019. The countries of middle east and Northern Africa have been key destination for Bangladeshi migrant workers. In the recent past, we can see that there have been large flows of Bangladeshi migrant workers to Southeast Asia, particularly to Malaysia and Singapore.

Image : The World Bank group ; KNOMAD Remittance helps in balancing of payments, increasing foreign exchange reserves, enhancing national savings and increasing velocity of money. International remittances represent around 7% of Bangladesh’s GDP. It also improved living standards of worker’s families and helped in improving their income of poorer and less skilled workers. Moreover, it is greater than foreign aid. The share of remittance in GNI ( Gross National Income) is increasing day by day. The bulk of the remittances are sent by Bangladeshi diaspora. Then question comes what is Bangladeshi Diaspora?

Bangladeshi Diaspora:

The Bangladeshi diaspora means a huge number of people of Bangladeshi descent who have immigrant to or were born in another country. Their first generation may have come abroad from Bangladesh for better living conditions. Almost 1.2 million people of Saudi Arabia belong to the Bangladeshi diaspora which is the large Bangladeshi diaspora.

Remittance rate during Covid-19 epidemic :

Covid-19 pandemic is having an acute effect on migrant workers. Most of them concentrated in continues with strict lockdown measures. World Bank estimates total remittance by migrant workers from Bangladesh will fall to $14 billon for 2020 around a 25% decrease from the previous year. It will represent a significant loss to million of household incomes in Bangladesh. For this epidemic a number of countries, including Kuwait, Bahrain, The Maldives, Qatar, Saudi Arabia and United Arab Emirates put pressure on countries like Bangladesh to repatriate their migrant workers.

Source : Central Bank of Bangladesh

Remittance from Bangladeshi nationals working abroad were estimated at US$1.09 billion in April 2020. It represents a fall of $353 million from the same month of April 2019, which was $1.43 billion. According to the Central Bank’s statistics, the flow of inward remittance fell by 16 percent in April from $1.29 billion a month ago.

Steps taken by Bangladesh government :

Our government has already allocated Tk 30.6 billion ($361 million) as incentives in the budget for this fiscal year to encourage expatriate workers to send their money through legal channels. For increasing the attractiveness of the remitters, some of the banks are also providing an extra 1% incentive for remittance beneficiaries. Bangladesh Bank is making efforts to ensure liquidity in the market to keep foreign exchange rate stable. The central bank had earlier taken a series of measures to encourage the Bangladeshi remitters to send their money home through formal banking system instead of illegal “hundi” system.

Conclusion :

Remittance assists in alleviating poverty, offer boost to the social status and indirectly build more sophisticated generation for future. To ensure providers can financially sustain their operations and maintain agent networks, government can create incentives to the banks, remittance providers, mobile operators and other enablers to the remittance flows. The termination of digital wallets can also help. Digital solutions can help us to go through this Covid-19 crisis.

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