By admin 
Bangladesh received nearly $27 billion in remittances this year – up 22% year-on-year – supported by a 9% rise in the official dollar rate and a decline in money laundering over the last five months.
Remittances through formal channels totaled $26.67 billion between January and December 28, an increase of about $4.7 billion from $21.92 billion in 2023, according to Bangladesh Bank data.
To understand this year’s remittance inflow, consider this: While Bangladesh received over $2 billion in remittances in just two months last year, the country surpassed $2 billion in all eleven months this year, with the exception of July, when internet and banking disruptions were linked to a mass uprising and expat solidarity affected inflows.
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As of December 28, the latest remittance total was $2.42 billion, which ranks second among the highest remittance months in history. The highest remittance, $2.59 billion, was received in July 2020 during the Covid period.
According to central bank data, the country’s gross foreign exchange reserves reached $21.33 billion yesterday, according to the IMF formula based on the Balance of Payments and International Investment Position Manual (BPM6).
Husne Ara Shikha, spokesperson for Bangladesh Bank, told The Business Standard that demand for hundi has declined in recent months due to reduced money laundering.
As a result, a significant portion of remittances that were previously channeled through hundi – an informal cross-border money transfer system that bypasses legal banking channels – now arrive through formal channels.
Moreover, the gap between dollar rates in formal and informal channels has narrowed to almost Tk1 due to the increase in the official dollar rate and reduced demand.
“Overall, we view the growth in remittances as positive, and we expect even better inflows next year,” said Shikha, who is also the central bank’s executive director.
Dollar exchange rate, falling demand for hundi: key drivers of growth in remittances
Senior officials at several banks told TBS that the remittance market is highly sensitive to exchange rates. When the dollar rate rises, remittance inflows generally increase.
September 2023 is a clear example: banks were ordered not to collect remittances at higher rates, and the central bank sanctioned the Finance Ministry heads of at least ten banks for buying remittance dollars at high rates. As a result, remittances amounted to only $1.33 billion in September 2023.
However, after the interim government came to power in August 2024 and raised the dollar rate, banks faced less pressure to collect remittances. This shift is now yielding positive results.
Analysis of central bank data shows that at the beginning of January 2024, the official dollar rate was Tk110. In the July-December monetary policy, the central bank devalued the currency by Tk7 – the largest single-day devaluation in history.
Banks were then instructed to buy and sell dollars based on a rolling mid-rate of Tk117, with verbal instructions to add a maximum of Tk1, bringing the rate to Tk118.
After the interim government took office in August, the rate was increased to Tk120. In December, the dollar rate rose to Tk128, but the central bank’s verbal instructions limited transactions to Tk123. This means an increase of at least Tk10 or 9%.
Bankers said this upward trend in the dollar rate has contributed to the increase in remittances.
Fahmida Khatun, executive director of the Center for Policy Dialogue, told TBS that the dollar exchange rate is crucial for boosting remittance inflows. When the dollar rate rises, remittances tend to rise.
Moreover, demand for hundi has declined since the interim government took office in August, although this change may be temporary. Khatun explained that it is difficult to reduce the demand for hundi in the long term due to the involvement of various international networks.
To further stimulate the inflow of remittances, the economist proposed offering social recognition to remittances in addition to a favorable dollar rate.
She proposed initiatives such as improving transportation for returning expats, including facilitating access to bus terminals, as a way to encourage remittances through formal channels.
“If this recognition is given, lenders will be more likely to send money through official channels,” she added.