Increasing Remittance from the US: What Does It Mean for Bangladesh?

254

Remittances—the money sent from citizens working abroad to families back home—are a crucial source of national income in Bangladesh. The inflow is one of the main driving forces in Bangladesh’s economic growth and development. It has a great effect on the both macro and micro level economy. Remittance has a positive impact on reducing poverty level, leading to higher expenditure on education and health at the household level and also is a more stable private capital flow than the ODA. It supports the economy by increasing foreign exchange reserves and national savings. At this critical juncture of Bangladesh’s development journey, when the nation is facing excruciating pressure as a result of the global financial crisis and businesses are failing to settle letter of credit payments due to a shortage of the greenback on the financial market, the remittance inflow is a sigh of relief that keeps the country moving. Traditionally remittance earnings have been dominated by Middle Eastern countries.

However, the situation is changing recently, as many Bangladeshi skilled people now work in developed countries like the USA and other European countries. Analyzing the earlier record of the Bangladesh Bank shows that the inward remittance flow from these western destinations, especially from the US, was gradually increasing in the previous years, and in the 2022-23 fiscal year, it is heavily competing with the flow from its Middle Eastern counterparts. The first six months of the current fiscal year attest to a transition in the pattern of inward remittance flow where the US has emerged as a new top provider country to Bangladesh, replacing Saudi Arabia’s decade-long position. While the increasing inflow is a good sign for the struggling economy, it also comes with the question of whether the soaring rate would sustain itself in the long run. This short brief first attempts to understand the global trend in 2022 followed by an attempt to assess the reasons behind the surge in remittance from the US and also look into the possible sustainability of a higher inflow of remittance from the US.

Global Trend of Remittance in LMIC countries and inflow in Bangladesh in 2022

In 2022, remittance flows to low and middle-income countries (LMICs) have increased by 4.9 percent to reach USD 626 billion but regional differences exist. The increase in 2022 follows a 10.2 percent growth registered in 2021 when remittance flows reached USD 597 billion (ILO, 2022). By region, Latin America and the Caribbean (9.3%), Sub-Saharan Africa (5.2%), Europe and Central Asia (10.3%), the Middle East and North Africa (2.5%), and South Asia (3.5%) all witnessed significant increases in remittance inflows. Remittances to East Asia and the Pacific fell by 0.7 percent; although excluding China, remittances grew 2.5 percent. Remittances have been the largest source of external finance flows to LMICs (ILO, 2022). According to the ILO report, remittance has been about three times the volume of Official Development Assistance (ODA) for more than a decade to the LMICs. For the first time ever, India as a single country received remittances worth more than $100 billion in 2022. According to World Bank data, Bangladesh ranked seventh in the global remittance recipient list and third in South Asia, receiving 21 billion USD in 2022.

– Wahid Uzzaman Sifat is a Research Intern at the KRF Center for Bangladesh and Global Affairs (CBGA).

Read Full Briefs as a Pdf [Link]