Why remittances are increasing during the Corona crisis

From January to April 2020, the remittance flow of Bangladesh gradually decreased. Many said that the flow of remittances has gradually decreased due to the Corona epidemic, which will continue to decline in the future. But to everyone's surprise, the country's remittance flow has been increasing since May during the Corona period, which is still in force. According to Bangladesh Bank, remittance growth in the same months of 2020 compared to July, August and September 2019 has increased by about 63, 38 and 48 percent respectively. The question is, what is the reason for sending remittances to expatriate Bangladeshis at this high rate? And how long will this high rate of remittances continue?

In looking for the answer to the first question, many factors can be considered at the root of the rise in remittances. First, those who have saved abroad for so long are remittances to the country because of the loss of jobs in the economic downturn caused by the Corona epidemic.

Second, those who traded abroad (especially in the Middle East) lost their businesses to the Corona epidemic. They are taking the rest of their capital back to the country.

Thirdly, those who used to transact money through hundi or other means are compelled to do so through coronal period (because informal channels are inactive or more risky) and are transacting through formal channels. As a result, the flow of remittances through formal channels has increased.

Fourth, encouraged by the government's remittance incentives, those who used to send money through informal channels are now sending money through formal channels. Fifth, there may be those who have sent black money abroad, because of this corona disaster they need some money in the country and they are taking back some money from abroad through various means. Although this possibility is much less.

The government started giving 2% incentive of remittances from July 2019 to collect remittances through formal channels in Bangladesh and to encourage expatriate Bangladeshis to send more remittances. Recently, Finance Minister AHM Mustafa Kamal said that the government's strategy of providing 2 per cent cash incentives to remittance senders was playing a leading role in boosting foreign exchange inflows in the country.

Now let's see what the remittance data given by Bangladesh Bank says? In the three months after the incentive was given (July-September, 2019), the remittance flow in Bangladesh did not increase at all compared to the previous three months (April-June, 2019); Rather slightly reduced. In the last three months of 2019 (October-December, 2019), remittances have increased by 6 percent compared to the previous three months. This shows that despite the incentives, the expatriates did not send much money to the country. That is, the incentive may have some effect, but it is not very significant.

In this case, it is better to say that seasonal employment occupies an important place in the case of unskilled or less skilled workers. Therefore, in the case of such workers, the income of some months of the year is higher than other months. This is evident from the fluctuations in sending remittances to expatriates. Bangladesh receives more remittances from the Middle East. And most of the Bangladeshi workers in the Middle East are low skilled workers. So we have to be very careful in analyzing the data of remittances. It is quite effective in this case compared to month to month. Quarterly analysis can also give fairly effective results. But some people compare remittances on a semi-annual basis, which leads to many wrong conclusions.

In the latest report of the World Bank's South Asian Economic Focus, the repatriation of expatriate savings is considered as the reason for the recent increase in the flow of remittances to Bangladesh. It is immediately thought that the flow of remittances will decrease in 2021.

Anyway, let's see what the World Bank has to say about the rise in remittances. In the latest report of the World Bank's South Asian Economic Focus, the repatriation of expatriate savings is considered as the reason for the recent increase in the flow of remittances to Bangladesh. It is immediately thought that the flow of remittances will decrease in 2021.

In fact, if there is no job, no matter how much incentive is given, where will the expatriates send money from? Many expatriates in the Middle East have already lost their jobs. Many of those who are still employed will lose their jobs during this time. And since there is no possibility of creating a new job market, the World Bank's forecast is bound to come true.

So in answer to the second question, there is no reason to think that sending remittances at this high rate at the time of this catastrophe is normal. As a result, this rise in remittances is not going to be sustainable.