1.0 Introduction 1.1 Problem Statement Remittance generates remarkable benefits for the home country economy, especially for tha t of a devel opi ng count ry, in terms of ma cro and mi croeconomic impac ts. The remitters, most of whom were once unemployed in the home country, are now getting employed in the host country, and on the other hand, the inward remittance is causing employment generation domestically by reinforcing national savings, capital accumulation and investment. Over and above the employment aspect, many other key macroec onomic variable s in Banglade sh such as growth, poverty reduction, social security, BOP situation have proven to be significantly positively related to remittances. Banglade sh has a long history of migration and overseas remitta nces. It is reporte d that as far back as in !"# Bangladeshi nationals had migrated to the port cities of $ondon and $i verpool in the %& '(ahmood !!). The Br it ish had a scheme of issuance of employment voucher to overseas workers seeking work abroad. The scheme, during the British regime, opened up a great opportunity for Bangladeshi workers to migrate to %nited &ingdom '%&). It is believed that thousands of Bangladeshis, especially from *ylhet, took the opportunity and created a flow of migration towards %&. +or certain reasons, howeve r, this flow had weakened by the !-s and the direction of the migration flow changed in the !-s. /fter the birth of Bangladesh, most Bangladeshi migrants sought to look 0ob to (iddle 1ast countries as well as selected 1% destinations 'mainly 2ermany). / tendency to find employment in developed countries like %*/, 3anada, Italy and in some /sian countries like 4apan, (alaysia and *ingapore was observed in the !!-s and onward. The proc ess of migrati ng abroad from Bangl adesh is cont inui ng strongly till now. The huge increa se in outward migration makes Bangl adesh as one of the ma0or remittance recipient countries in the world. In recent years, Bangladesh has been receiving remittance inflow close to %*5 billion and more each month. $ast ye ar, Bangl adesh had received %*5 #.6" bi ll ion in remitta nces and a decade ago the figure was %*5 #.7 billion 'The 5aily *tar, #-#). This has boosted the central bank8s foreign currency reserve and stabili9ed pressure on B5T and balance of payment. If the current trend of remittance inflow continues central bank hopes tha t the rem itt anc e wi ll st and at %*5 " bil li on in the cur ren t fi sca l ye ar.
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7/18/2019 Road map to Transform Bangladesh Into a Progressive Country_Term Paper_Economics
Remittance generates remarkable benefits for the home country economy, especially for
that of a developing country, in terms of macro and microeconomic impacts. The
remitters, most of whom were once unemployed in the home country, are now getting
employed in the host country, and on the other hand, the inward remittance is causing
employment generation domestically by reinforcing national savings, capital accumulation
and investment. Over and above the employment aspect, many other key macroeconomic
variables in Bangladesh such as growth, poverty reduction, social security, BOP situation
have proven to be significantly positively related to remittances.
Bangladesh has a long history of migration and overseas remittances. It is reported that as
far back as in !"# Bangladeshi nationals had migrated to the port cities of $ondon and
$iverpool in the %& '(ahmood !!). The British had a scheme of issuance of
employment voucher to overseas workers seeking work abroad. The scheme, during the
British regime, opened up a great opportunity for Bangladeshi workers to migrate to
%nited &ingdom '%&). It is believed that thousands of Bangladeshis, especially from
*ylhet, took the opportunity and created a flow of migration towards %&. +or certain
reasons, however, this flow had weakened by the !-s and the direction of the migration
flow changed in the !-s. /fter the birth of Bangladesh, most Bangladeshi migrants
sought to look 0ob to (iddle 1ast countries as well as selected 1% destinations 'mainly
2ermany). / tendency to find employment in developed countries like %*/, 3anada, Italy
and in some /sian countries like 4apan, (alaysia and *ingapore was observed in the
!!-s and onward. The process of migrating abroad from Bangladesh is continuing
strongly till now. The huge increase in outward migration makes Bangladesh as one of the
ma0or remittance recipient countries in the world.
In recent years, Bangladesh has been receiving remittance inflow close to %*5 billion
and more each month. $ast year, Bangladesh had received %*5 #.6" billion in
remittances and a decade ago the figure was %*5 #.7 billion 'The 5aily *tar, #-#). This
has boosted the central bank8s foreign currency reserve and stabili9ed pressure on B5T
and balance of payment. If the current trend of remittance inflow continues central bankhopes that the remittance will stand at %*5 " billion in the current fiscal year.
7/18/2019 Road map to Transform Bangladesh Into a Progressive Country_Term Paper_Economics
other things remain the same, the money supply is eApected to rise. This may be eAplained
with the help of two basic monetary e<uations.
Total Reserve money 'or highpowered money) is e<ual to domestic credit 'or assets) plusinternational reserves held by Bangladesh Bank. The money that we use in our daily
transactions derives from the <uantity of R(. The total supply of money is e<ual to money
multiplier times the highpowered money 'The 5aily *tar, #--!).
(able ")(rend in %onetar& 'ggregate 'Dearonyear percentage change)
/ccording to a survey conducted by Bangladesh Bank in #-# remittance in Bangladesh is
used for the following purposes=
• To buy food
• To repay loan
• To build and renovate homes
• To buy land and flat
• To pay for education
• To send member of family abroad
• To start a business
• To spend for marriage
• To invest in +5Rs and other savings instrument
• To invest in savings certificate
• To invest in capital market.
(ost of the people use the money to buy food, repay loans, construct and renovate home,educate members of family, pay for medical bills and buy land and flat.
3.0 -inding
Remittance has been growing steadily over the last decade as the number of people
migrating to abroad has been increasing. In #---# amount of remittance was Tk. "C!-
crore which grew to Tk. 6#!!#.6! crore in #--.
Remittance accounted for 7.#: of 25P of Bangladesh in #---# and in #-- it
accounts for -.7C: of the 25P and 7-.6#: of 1Aports. This shows remittance is crucial
for Bangladesh8s economy.
Remittance is coming mainly from lessskilled workers as their number has been growing
each year. Gumber of professional people growing abroad shrunk in recent years.
(oney supply in Bangladesh depends on . narrow money, #. broad money '(#), and
C. reserve money 'high power money). The foreign eAchange received from overseas in
C
7/18/2019 Road map to Transform Bangladesh Into a Progressive Country_Term Paper_Economics
form of remittance remains as foreign eAchange in the balance sheets of the commercial
banks. This increases (# in the economy. (oney supply depends on reserve money and
money multiplier. (# and money multiplier have been increasing over the last decade.
?henever money supply (# increases there is upward trend movement of inflation rate.
3onsumer price indeA '3PI) depends on food and nonfood inflation. This inflation rate in
#---# was #.!: and in the year year #---6 to #-- the rate was above .7:.
Regression and correlation analysis between percentage change in 3PI and percentage
change in remittance flow is positive and very week 'r s<ure K -.-67) respectively.
3orrelation between percentage change in 3PI and total remittance inflow in not strong as
r s<ure K -."7.
3orrelation between total remittance and (# in the economy is very strong as r s<uare K
-.!.
Remittance is used for several purposes by its beneficiary, mainly the family members of
the remitters.
0". oncluion
Remittance inflow to Bangladesh has been growing over the years. /s there is strong
correlation between remittance and money supply in the economy, increase of remittance
increases money supply as it has been found. Inflation is not 0ust caused by money supply
in the economy there are other factors and government monetary policy which also affectinflation. Remittance plays an important role in the economy as it counts a significant
portion of the 25P. People have been using the remittance flow for various purposes