Bangladesh is on track to receive a record-high remittance in May, thanks largely to the depreciation of the local currency against the US dollar, central bankers say, expressing optimism despite concerns over foreign exchange reserves.
The country, grappling with multiple economic challenges and a persistent shortage of foreign currencies, has already received $2.143 billion in the first 29 days of May. This amount marks a 38-percent increase compared to the same period last year when remittance stood at $1.553 billion.
The remittance received in these 29 days is also higher than the totals for the previous two months, with April at $2.044 billion and March at $1.997 billion. The Bangladesh Bank is hopeful that the total inflow for May will set a new record once the earnings from the remaining two days (May 30 and May 31) are added.
“The monthly remittance will set a new record of earning in recent years once the earnings of the remaining two days are added up,” said a source from the Bangladesh Bank.
As of May 29, the total remittance earnings for the fiscal year 2024 have reached $21.261 billion, which is more than 95 percent of the $21.61 billion earned in the entire fiscal year 2023.
A Bangladesh Bank official, speaking anonymously, noted that remitters usually send more money ahead of religious festivals like Eid. However, the recent 5.98-percent devaluation of the Bangladeshi taka against the US dollar likely encouraged more transfers ahead of Eid-ul-Azha.
“I think the May remittance inflow would set a new record in recent years, which would be a great relief under the current macroeconomic context,” the central banker added.
The country’s rapidly depleting foreign exchange reserves have become a serious concern for the $460 billion-plus economy. Bangladesh faces difficulties in meeting the net international reserves (NIR) target set by the International Monetary Fund (IMF) as part of a $4.7-billion lending package aimed at restoring macroeconomic stability.
On May 8, the central bank’s monetary policy committee (MPC) made a significant decision to raise the exchange rate to Tk 117 from Tk 110 to stabilize the forex market. This revision caused the local currency to depreciate by 5.98 percent per dollar, allowing dollar holders to gain more from their foreign currencies.
As of May 29, Bangladesh’s gross foreign exchange reserves stood at $24.22 billion, according to the Bangladesh Bank. However, the IMF, using a different methodology (BPM6), reports the reserves at $18.72 billion for the same date.