Bangladesh saw a record remittance flow with USD 2.25 billion during the initial 19 days of March 2025. That is a whopping 78% higher than last year’s corresponding days since Bangladeshi expats sent more money to the motherland before Eid-ul-Fitr, which is one of the biggest religious festivities across the country.
The dramatic increase in remittances has been owing to a variety of reasons including lower hundi transactions, narrowing spreads between formal and informal channel exchange rates and increased government initiative to encourage legal remittance flows. Foreign funds influx has been a great relief for Bangladesh foreign exchange reserves that has allowed Bangladesh Bank to clear foreign payables and ease import restrictions that were put in place on account of dollar crisis.
Decline in Hundi Transactions Drives Legal Remittances
The experts said that a considerable cause of the boom in remittance is that there was a decline in hundi operations, illegal and informal money transfer through circumventing banks. Government and central bank of Bangladesh acted sternly against hundi workers in the last twelve months and that is why transactions moved to formal banks and digital financial institutions.
According to Dr. Ahsan is H. Mansur the economist and Director of Bangladesh’s Policy Research Institute, “There was a big number of expatriates who used to do higher rates through hundi channels. Official channels are attractive too with this government drive and incentives. Moreover, the authorities also managed to narrow unofficial and official rate gap to quite large that it was no more profitable for expatriates to turn to hundi.”
Policy reforms and governmental incentives are paying off.
The Bangladeshi government has made deliberate attempts to encourage legal remittances through offering cash incentives and improving bank services for expatriates. The 2.5% incentive on remittance transactions that has been introduced to attract larger flows through official channels has been effective.
Besides that, banks made it easier for the remittance by having quicker transactions and less costly charges and improved customer service to motivate foreign workers to make official arrangements. Increased use of mobile financial services like bKash, Nagad, and Rocket has also played a major role in increasing remittance receipts.
Seasonal trends and Eid-ul-Fitr drive inward movements.
Remittances used to rise traditionally before major holidays such as Eid-ul-Fitr and Eid-ul-Adha as millions of expats make money transfers to finance holiday-related costs. Remittance demand this Eid has been unusually robust with prices going through the roof as expats are sending more to help families cope with higher costs.
Financial analyst Md. Rafiqul Islam said that “It is a time of the year when people need more funds for shopping and traveling and charity. It is a seasonally increasing time every year and this time it has been boosted by both a lower amount of hundi transactions and a better exchange rate.”
Effect on Economy and Foreign Exchange Reserve
The recent rush of remittances has been a welcome boost to Bangladesh’s dollar-strapped foreign exchange reserves and a widening trade deficit and import prices. Bangladesh has been dollar short and for this reason imported non-essential and luxury goods have been restricted by the central bank.
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The heightened remittance flow enabled the Bangladesh Bank to pay off a portion of its international payment commitments such as LC settlement and outstanding to foreign creditors. Higher flows also helped to stabilize the exchange rate and lower currency market volatility.
The senior official of Bangladesh Bank said, “The boom in remittances has given us room to serve the economy. We’ve been in a position to retire outstanding payments and ease some restraints on large-ticket imports. If the trend is sustained, it will help increase our forex reserves and economic solidity.”
Challenges and Future Opportunities
Even with this increasing trend, experts advise that it is necessary to keep support policies going to maintain high remittance flows. The government should keep discouraging use of informal channels, offer increased incentives and ensure that expatriates are given competitive exchange rates.
In addition to this, increased emigration of skilled workers can provide a means to maintain and even increase remittance flows in the long run. Many Bangladeshi workers are employed in low-paying jobs abroad, and upgrading workers to higher-paying jobs in the Middle East and North America and Europe can increase remittance income by a considerable amount.
Since Bangladesh is to graduate to the rank of Least Developing Country (LDC) by 2026, remittances will continue to be a source of impetus to economic growth, stability of foreign exchange and poverty reduction. Although the recent rise is a welcome trend, what will continue to support a long-term, consistent increase in flow of remittances is a consistent drive towards policy reforms, adoption of digital banking and development of human resources. For now, USD 2.25 billion account for a season’s best for the Bangladeshi economy and are giving it a welcome reprieve in time for Eid-ul-Fitr festivities and reiterating the position of expatriate contribution to economic stability in Bangladesh.
Source: Business Inspection BD
