Remittance hits 10-year high
Migrant workers remit more to cash in on falling taka against dollar
Star Business Report
Remittance inflows hit a decade high of $12.17 billion in the just concluded year, offering the government a much-needed cushion against dwindling foreign exchange reserves and exchange rate volatility.
Remittances grew 10 percent in 2011 from the previous year.
According to data from Bangladesh Bank, remittances rose 26 percent to $1.14 billion in December, compared to the previous month.
“An increase in the outflow of workers and the depreciation of the taka have bolstered the inflow,” the central bank said in a statement yesterday.
A migrant worker now gets Tk 82 for a US dollar, up from Tk 70 a year ago, according to treasury officials.
The latest growth in remittances comes as more workers are joining the bandwagon of more than 7.6 million Bangladeshi migrants, 80 percent of whom working in the oil-rich Middle East.
During 2011, the outflow of migrant workers surged 45 percent to a two-year high at 568,000 due to opening of new jobs.
Key Middle East countries need more foreign workers now as they are taking more development projects, inspired by high oil prices at around $100 a barrel.
Between the years 2002 and 2008, remittance earnings were below $10 billion.
The inflow crossed the double-digit mark in 2009, buoyed by a record outflow of migrants during 2007 and 2008 in the wake of a construction boom in the Gulf states.
After 2008, the outflow of new migrants slumped due to a slowdown in demand. But it rose again last year, enabling Bangladesh to emerge as the eighth largest remittance earning country, according to a World Bank survey released last month.
The growth in remittances, the second biggest foreign currency earning sector after exports, gives a much needed cushion to the government to face a rising pressure on the country’s balance of payments (BoP).
“It gives a breathing space. The growth is very much needed considering the falling foreign exchange reserve situation and volatility in exchange rate,” said Zahid Hussain, a senior economist at the World Bank’s Bangladesh office.
“The growth will help policymakers face the pressure on the balance of payments,” he said.
Hussain linked the spiral in remittances to a rise in the outbound workers.
He said this growth should continue at least in the next six months.
“But a deep and protracted recession is bad news for us from the perspective of remittances earnings,” said Hussain, fearing that the deepening of Eurozone crisis might lead to a decline in oil prices and thus hurt the economies in the Middle East.
“There is a risk whether contracts of the old workers will be renewed if the economies of these worker-employing countries slow down.”
He said a portion of workers who left the country in the recent months would begin sending money by the end of the current year.
But he suggested that the earnings per worker should be increased for long-term sustainability in the growth of remittances, which account for 11 percent of the country’s gross domestic product.
“It is important to focus on sending more skilled workers to raise earnings per worker,” said Hussain.
“Otherwise it will be tough to retain the pace of growth.”
He said the demand and wages for skilled workers will go up with the development of host countries.