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Bangladesh received a record $3.29 billion in remittances in March — the highest monthly figure to date — marking a 65 percent year-on-year surge.

The rise is largely attributed to stronger inflows through formal channels, an uptick in overseas employment and expatriates sending more money home for Eid-related expenses.

This influx has offered a much-anticipated tonic to an economy under strain, with foreign exchange reserves under pressure and the interim government navigating macroeconomic challenges.

Remittance earnings have been climbing steadily since August last year, providing some much-needed breathing space.

According to the Bangladesh Bank, the previous monthly record was set in December 2024, when remittances reached $2.64 billion. The latest figure crossed that, setting a new benchmark for Bangladesh.

Between July and March of the current fiscal year (FY) 2024-25, total remittances amounted to $21.77 billion — up from $16.69 billion during the same period the previous year.

Zahid Hussain, former lead economist at the World Bank’s Dhaka office, said a shift towards formal remittance channels has most likely caused the spike.

The change, he said, followed a decline in demand for informal hundi networks after politically linked money launderers went into hiding with the political changeover in August last year.

Quoting the White Paper on the State of the Bangladesh Economy, the economist said illicit outflows — historically equivalent to 35-75 percent of official remittance flows — were estimated at around $16 billion annually.

“As hundi-driven outflows declined, formal channels absorbed significant volumes,” he added.

While the US dollar’s depreciation played a role, Hussain said its impact was marginal.

Remittances are usually sent in dollars, so when currencies like the Malaysian ringgit gain strength, the dollar value of remittances increases. However, this factor alone doesn’t account for the recent surge, he said.

“Religious occasions such as Ramadan and Eid, or the shifting timing of Ramadan, also fail to fully explain the increase, as historical patterns have shown mixed trends,” he added.

Following the Covid-19 pandemic, the number of Bangladeshi migrants sending money home rose by 2.9 million. Although political turmoil disrupted flows temporarily, formal channels capitalised on the larger migrant base and the reduced reliance on hundi networks.

Their speed, security, and expanding range of services also contributed to their growing popularity among expatriates, according to Hussain.

Figures from the Bureau of Manpower, Employment and Training (BMET) show that manpower exports crossed 1 million in 2017 before falling to between 200,000 and 700,000 annually over the next four years.

The number rebounded in 2022, crossing 1.1 million, and surged further in 2023 and 2024, reaching 2.3 million.

Although manpower exports rose, remittance growth remained subdued during 2022 and 2023. The turning point came in late 2024, after Sheikh Hasina’s fall in a popular uprising in August last year.

The upward trend began in September 2024, when remittances soared 80.3 percent year-on-year to $2.4 billion. The momentum continued: $2.39 billion in October, $2.19 billion in November, $2.63 billion in December, $2.18 billion in January and $2.52 billion in February.

This sustained growth has eased pressure on the country’s foreign exchange reserve. Improved liquidity in banks’ net open positions has helped clear foreign currency payment backlogs, support the rebound in imports, and strengthen reserves.

According to central bank data, the country’s forex reserves reached a record high of $48 billion in August 2021 but declined to $25 billion by July 2024. Due to a plunge in reserves, local currency Taka weakened by 42 percent over the three years leading up to August 2024.

As of April 6 this year, the country’s foreign exchange reserves rose to $25.63 billion. However, under the BPM6 calculation method of the International Monetary Fund (IMF), reserves increased to $20.46 billion, a BB official said.

“The surge in remittance has significantly stabilised the forex market,” Hussain said. “It has enabled the country to meet external obligations on time, helping restore confidence in the economy.”

Remittance inflows are rising largely due to growing public confidence in the current government, said Prof Rashed Al Mahmud Titumir, chairperson of Unnayan Onneshan.

“When people can put trust in a government, they feel happy to send their hard-earned money through the formal channels. So, the remittance will increase if the government stabilises,” he said.

Prof Titumir, a former chair of the Department of Development Studies at Dhaka University, added that banks are also playing a more active role in attracting remittances through official channels, contributing further to the steady rise in formal inflows.

Remittance inflows surged ahead of Eid-ul-Fitr, driven largely by increased transfers during the festive period, said Ashikur Rahman, principal economist at the Policy Research Institute (PRI).

He noted that reduced pressure from money laundering has weakened demand for informal hundi transactions, prompting more expatriates to turn to formal banking channels.

“Besides, the narrowing exchange rate gap between formal and informal channels — now just Tk 1.5 to Tk 2 — has further incentivised remitters to utilise official banking routes,” Rahman added.

The rise in remittance has helped ease the country’s foreign debt burden. At the same time, the smaller gap between open market and bank exchange rates has boosted confidence in formal channels, contributing to greater stability in the dollar market.

Reflecting this trend, the current account deficit fell sharply to $552 million during the July-January period of FY25, an 87 percent drop compared to the $4.28 billion deficit recorded over the same period in FY24.