The remittance inflow to the country dropped around 25% in September to $1.54 billion compared to August earnings making it the lowest in seven months.
According to central bank data published Sunday (2 October), Bangladesh received $2.04 billion in remittances in August.
The total remittance inflow in the current financial year is $5.67 billion.
It was $5.41 billion during the same period last year.
A recent meeting presided over by the Expatriate Welfare Minister identified two reasons for the decline in remittances.
According to experts, the cost of living for expatriates increased due to global inflation. Additionally, they are preferring hundi over legal remittance channels as they are getting Tk5-6 per dollar more than the bank exchange rate.
Remittances dropped to a seven-month low in September as the central bank fixed the dollar exchange rate for inward remittance. Bangladesh received a lower remittance of $1.49 billion last February.
Bankers said the downfall happened after, on the advice of the central bank on 12 September, the banks fixed the dollar exchange rate for remittances at Tk108.
However, bankers had initially feared that remittances may decrease due to fixing the exchange rate. The exchange houses said that the remittances came in less in the first week after the rate was fixed as remitters could not be given higher rates.
They had expressed concern that the Hundi channel may become more active.
AB Mirza Azizul Islam, economist and former financial adviser to the caretaker government, said the government have to try and find out how to increase remittance.
"Efforts should be made to get increase remittances from new markets. Now that the Malaysian market has opened up a bit, South Korea is also showing interest. We should try to send more skilled workers there," he told The Business Standard.
He further said the single exchange rate for remittance set by Bafeda should be scrapped if it discourages expatriates from using legal channels.
A visit to the website of several exchange houses including Moneygram and Western Union shows that they are paying Tk106-107 per dollar for remittance inflow. However, the houses also charge $1-2 as transfer fee.
As a result, those who send remittances in small amounts do not get an average rate of more than Tk104-105 a dollar.
At present remittance through Hundi yields Tk113-114 per dollar. Due to fixed exchange rate at banks, the difference between dollar price of Hundi and the banking channel is at least Tk6-7.