Eid remittance falls due to low dollar rate

Remittance inflow usually increases in Ramadan ahead of Eid but the amount of money sent home by Bangladeshis working abroad dropped by about $151 million in April compared to March due to a lower rate of the US dollar offered by banks.

An analysis of central bank data reveals that the country received $1,423 million in remittances between 4 and 24 March, which fell to $1,272 million in the corresponding period of April.

Of the received amount in April, $313 million came in the third week of the month, but the first two weeks each saw an inflow of over $475 million.

Remittances came in at $2.01 billion in April 2022, which was also the month of Ramadan.

Asked why remittance flow dropped slightly this Ramadan, senior officials of several banks told The Business Standard that remittance inflow crossed $2 billion in March as more than 20 banks offered remittance rates of up to Tk114 per dollar. 

But in April, most banks offered Tk107 for a dollar set by the Bangladesh Foreign Exchange Dealers Association (Bafeda), which is the main reason why remitters sent less money despite the occasion of Eid, the officials said.

However, the head of the treasury department of a private bank, on condition of anonymity, told TBS that although most banks are bringing in remittances at the Bafeda-set rate of Tk107, a few banks are offering higher rates to cover the shortage of the greenback.

The managing director of a private bank, wishing not to be named, told TBS, "We are under pressure to pay import bills for the next two-three months and it is very important for us to get more remittances."

"Our imports have declined due to central bank restrictions and the ongoing dollar crisis but exports are also on the declining trend. It should be noted that we are an import-based country, not an export-based one. That is, our imports are more than our exports. So, we have to fill this gap with remittances. Remittances of less than $2 billion per month actually make it difficult to make import payments properly," the bank MD said.

"The first three weeks of April data shows that remittances will not reach $2 billion by the end of the month. The main reason for the decline is the low dollar rate," the official added.

Ali Reza Iftekhar, the managing director and CEO of Eastern Bank Ltd (EBL), told TBS, "There is a division among remitters over the rate. One party thinks that the remittance rate should be higher. They are not sending remittances now hoping to get a slightly higher rate later. The other party is sending remittances through illegal channels such as Hundi to get a Tk3-4 more per dollar, resulting in reduced remittances through legitimate channels. We need more remittance for the country's economic stability."

Banks charging Tk114 to settle import LC

Although the remittance rate offered by banks decreased slightly in April compared to March, traders have to pay up to Tk114 a dollar to banks for opening import letters of credit (LCs) as before.

Md Shahidullah, the secretary general of the Bangladesh Steel Manufacturers Association and managing director of Metrocem Ispat Ltd, told TBS, "We are not able to open enough LCs to import raw materials. Due to the dollar crunch, we could open only two LCs against the need of 10 last week and we had to pay Tk113-114 per dollar."

Besides, due to the higher LC margin, we now require more working capital and the cost of production has gone up drastically, Shahidullah said, adding: "Earlier, we were required to have 5% cash margin, but now we have to keep up to 50% in many cases."

Mentioning that traders have to import 100% raw materials for cement and steel production, the business leader said, "We are using 30-40% of our production capacity due to a shortage of raw materials. The price of construction material is increasing in the market as the production is low."

A top importer of daily commodities, on condition of anonymity, told TBS, "We are not getting dollars even paying high rates. Banks are charging us at the official dollar rate of Tk107-108, but the remaining Tk6-7 per dollar has to be paid through cash or cheque."

When asked, several bank officials said, big exporters do not want to sell dollars at a low rate and charge up to Tk113 per dollar. 

"We are buying at Tk113 and selling at Tk114 with a profit of Tk1 as per central bank rules. Currently, importers' demand for dollars is greater than supply. We have nothing to do here," said a bank official.