The abolition of India’s higher value bank notes leads to price hike in US dollar as well as its crisis in Bangladesh curb market as tourists opt for the bucks before visiting India.
Besides, the abolition has also encouraged expatriates to send money home through illegal means. As a result the remittance inflow into Bangladesh through banking channel recorded its lowest within five years in November.
Bangladesh received the remittance of $951m in November this year, a monthly lowest receipt in five years from $900m in November 2011, according to the latest data of Bangladesh Bank.
The monthly remittance amount had remained over $1bn since 2012.
Biru Paksha Paul, chief economist of Bangladesh Bank, said the abolition of Indian note created dollar crisis in Bangladesh’s market because tourists are buying dollars instead of rupees. As a result dollar price went up to Tk84 in the curb market but institutional price remained at Tk78.
He opined that wide difference between the rates of curb market and institutions pushed the remitters to send money through illegal way.
“We have enough reserves but that is electronic money. Dollar remaining in cash is used for exchange and the abolition of higher value rupees created cash crisis. Although local currency was supposed to depreciate due to rise in dollar price, it did not happen.”
He said Bangladesh Bank is mulling over some steps to depreciate local currency to bring balance in dollar price between curb market and institution.
In a move to curb the black money menace, Indian Prime Minister Narendra Modi declared abolition of currency notes of Rs1000 and Rs500 from November 9.
Remittance inflow became slower after the gulf countries faced crisis in oil business due to fall of oil prices, said a senior executive of Bangladesh Bank.
Expatriates living in gulf countries sent a total remittance of $548m in November compared to $591m in October this year.
The country received the highest monthly remittance of $671m in August from middle-eastern countries within the five months of current fiscal year.
The total remittance from the gulf countries was $8.55bn in the fiscal year 2015-16, lower from $9bn in the previous fiscal year.
The total remittance received from Bahrain in five months from July to November of the fiscal year 2016-17 stood at $147m followed by Kuwait $419m, Oman $367m, Qatar $220m, KSA $964m and UAE $874m, according to the central bank data.
The government tightened monitoring on money inflow to resist militant financing which also contributed to slower remittance growth.
A senior BB official said expatriates preferred illegal way to send money to avoid hassle in traditional banking channel.
Remittance inflow from western and European countries also dropped to $402m in November this year compared to $419m in previous month.
The exchange rate in domestic market remained stable between Tk77 and Tk78 over the last two years.
But the dollar rate in the curb market was between Tk82 and Tk83.
The wide difference between institutional rate and that in the open market encourages expatriates to send money through illegal means, said a senior BB economist.
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