Remittance inflow reaching a record level amid the pandemic, and subsequently contributing to the country's economic recovery, was an unexpected fortuitous event that clearly showed that foreign currency remittance can play an even bigger role in the country’s economy than it typically does.
The rise of remittance in the preceding month of January, compared to December 2021, should act as a reminder that the force of remittance income should be harnessed to achieve its fullest potential.
But right now diversion of remittance is causing a dent in the inflow.
During the peak of the pandemic, when travel restrictions halted the hundi channels, remittance through formal routes leapt up, proving what everyone already knew -- that remittance diversion can be mitigated.
But it seems that no one is willing to work out how.
The informal channels opened up again once the Covid-induced travel restrictions were lifted, causing the decline of inflow through the formal channels. The higher charges -- both in service and exchange rates -- are reasons enough for migrant workers and others to choose the informal channels.
And it’s not that the government isn’t aware of ways to lure them into the formal channels. The 2% cash incentive by the government that began in 2019 encouraged many to use formal channels.
Experts have also conventionally advised stronger monitoring by the central bank to discourage the informal channels. But the solution has to be multifaceted, with keeping a stable exchange rate being paramount.
The relevant administrative bodies should push for new and constantly-updateable policies through which innovative measures can be taken to stop decline and to ensure wider inclusion of remittance senders into the formal channels.
