Bangladesh's foreign exchange market has been unstable since 2022 due to a significant imbalance in foreign trade. This turmoil in the forex market has persisted ever since. Currently, it has around $20 billion in its foreign exchange reserves, far lower than the record $40.7 billion it boasted in August 2021.Over the past three years, the dollar's exchange rate against the taka has surged by more than 42%.As a result, the exchange rate of the dollar has surged up to 130 taka from 84 taka.
Despite the imbalance in foreign trade, remittances from expatriates have played a crucial role in mitigating the declining trend of forex reserves in the country. Remittances, in addition to foreign trade, are a key source of Bangladesh's foreign currency earnings.
However, the desired results were not achieved due to the persistent trend of money laundering, despite various initiatives taken by the previous government to increase remittances. In contrast, the interim government has taken several measures to encourage expatriates to send remittances through legal channels, which have already begun to show signs of success.
Bangladesh Bank officials have noted that following the formation of the new government, stricter measures to curb money laundering have significantly reduced transactions through informal channels like hundi. Expatriates sent $11.14 billion in remittances, which is 26.44% higher compared to the same period of the previous fiscal year. Thus, remittances have played a significant role in increasing the flow of dollars into the country's banking sector during the current fiscal year.
Millions of Bangladeshi immigrants reside across nearly 200 countries worldwide, contributing to the labor market in various sectors ranging from high-tech to agriculture. However, these expatriates make their most significant contributions to Bangladesh's economy by bringing in foreign currency. Despite this, the remittance flow rate, relative to the number of Bangladeshi expatriates, is lower compared to the neighboring countries.
Thousands of expatriates are forced to work for low wages and face various forms of harassment as government-approved agencies have illegally taken them abroad. However, the current government has begun taking various initiatives for the welfare of expatriates, which will not only improve their living standards and working conditions but also provide safety and security of their families.
In September, the government introduced a 2.5% incentive for Bangladeshi expatriates who will legally transfer compensation funds - received for deaths or injuries abroad from employers or insurance companies - back to Bangladesh. Before that, the government offered a 2.5% incentive only for wage earners' remittances sent by expatriates.
From December 15, the issuance of Machine Readable Passports (MRP) has commenced in Saudi Arabia. Gradually, it will be expanded to other countries as well. Also, a dedicated lounge for expatriates has been established at the airport. Previously, expatriates often faced harassment at various stages of immigration, but their troubles have now significantly decreased. Additionally, funds can now be sent directly to the Probashi Kalyan Bank from abroad. To further facilitate expatriates, the upper limit on remittances has been removed.
Currently, the net reserve stands at less than $15 billion. As a condition for receiving the next installment of the IMF loan, Bangladesh's net reserve must reach $15 billion by the end of December. However, there is still a slight shortfall in meeting the target. And, remittance inflow in this regard can be the biggest savior for the nation. If our expatriates decide to contribute to their country, they should depend completely on formal channels. After the July revolution, the Hundi networks have faced disruption. While they are trying to re-group with new agents and vendors countrywide, the government should be more vigilant to undermine this effort.
In return, the government needs to focus more on the welfare of the expatriates. The government needs to acknowledge their contribution to our economy more openly. Expatriates should be treated as a significant contributor to the nation and their process should be hassle-free and smooth. Lastly, reciprocity and altruism should be the keys.
The writer is a Lecturer, Rabindra Maitree University, Kushtia
