Remittances through formal channels in Bangladesh reached $26.67 billion from January to December 28, 2024, according to data from the Bangladesh Bank. This marks a $4.7 billion increase from $21.92 billion in 2023, reflecting a robust 22% year-on-year growth. The rise was driven by a 9% increase in the official dollar rate and a significant reduction in money laundering during the last five months of the year.
Monthly Milestones
While in 2023, Bangladesh received over $2 billion in remittances during only two months, this year exceeded $2 billion in 11 months, except in July. That month saw disruptions in internet and banking services due to political unrest and expatriate solidarity efforts, temporarily impacting inflows.
As of December 28, the country recorded $2.42 billion in remittances, the second-highest monthly total in history. The record remains $2.59 billion, achieved in July 2020 during the COVID-19 pandemic.
Foreign Exchange Reserves and Drivers of Growth
Bangladesh’s gross foreign exchange reserves stood at $21.33 billion on December 28, as calculated using the IMF’s Balance of Payments and International Investment Position Manual (BPM6).
According to Bangladesh Bank spokesperson Husne Ara Shikha, the decline in demand for the informal hundi system, largely attributed to reduced money laundering—has shifted more remittance flows into formal banking channels. Additionally, the gap between formal and informal dollar rates has narrowed to about Tk1, driven by the increased official dollar rate and lower informal demand. “Overall, we consider the growth in remittances positive and expect even better inflows next year,” Shikha said.
Policy Changes and Dollar Rate Dynamics
The remittance market, highly sensitive to exchange rates, has benefited from key policy changes. In early 2024, the official dollar rate was Tk 110. However, during the July-December monetary policy period, the central bank implemented a significant devaluation, raising the rate by Tk 7 to Tk 117 through a crawling peg system. By December, the rate had climbed to Tk 128, with transactions capped at Tk 123 due to central bank instructions.
The interim government, which assumed power in August 2024, further adjusted the dollar rate, contributing to the 9% annual increase.
Challenges and Recommendations
Despite these gains, challenges remain. Fahmida Khatun, executive director of the Centre for Policy Dialogue, emphasized that while the rise in the dollar rate has spurred remittance growth, the long-term reduction of hundi demand is complex due to international networks.
Fahmida Khatun suggested that alongside a favorable dollar rate, remitters should be offered social recognition and improved services, such as better transportation for returning expatriates. “If recognition is provided, remitters will be more inclined to use formal channels,” she noted.
Looking forward
With targeted policies and continued reforms, Bangladesh is poised to further strengthen its remittance inflows, bolstering economic resilience and foreign exchange reserves in the coming years.
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