Lesson Learnt from Bangladesh’s Inspiring Remittances Performance

Dhaka, Bangladesh | July 18, 2007 by D-8 Secretariat

Bangladeshi expatriates sent home a record 3.32 billion U.S. dollars in the first seven months of the current fiscal year, marking a 29 percent growth over the same period of the last fiscal year, according to the central bank, the Bangladesh Bank.

The International Monetary Fund (IMF) has suggested Bangladesh to create opportunity for productive use of wage earners remittances instead of consumption. IMF also suggested that the government policies should support financial deepening to provide savings instruments for those who do want to save out of their remittance receipts.

IMF said remittances are a welcome source of foreign financing and should be promoted. They are larger and less volatile than ODA (Official Development Assistance), they are unrequited transfers which do not create debt service in the future, and they help cushion the economy against oil price shocks. According to various cross-country studies, it said countries could promote remittances through official channels by abstaining from dual exchange rate practices and current account restrictions, by reducing transaction costs through increased competition in the banking sector, and by fostering financial sector development more generally.

Remittance receipts in Bangladesh has increased by 17 percent, on average, in each of the last 30 years and meanwhile constitute the largest source of foreign exchange after exports.

In 2006, IMF said workers remittances amounted to 7.7 percent of GDP, compared to 16.8 percent of GDP for merchandize exports, 1.9 percent of GDP for ODA and 1.1 percent of GDP for FDI. The current stock of Bangladeshi overseas workers is estimated at 3.9 million (2.8 percent of the population) translating into an average annual remittance of $1,230 per worker.

Since some D-8 countries are the supplier of migrant workers, Secretary General last week had contacted some participants who attended International Meeting on Migrant Workers in Brussels, Belgium, to work with D-8 Organization on ideas to set up a Working Group on Migrant Workers and Remittances. This would also include cooperation of international organization such as ADB, World Bank and IMF.

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