Remittance surge cushions external sector amid risks: GED report

Remittance inflows continue to play a crucial role in stabilising Bangladesh’s external sector, offsetting mounting pressures from rising import payments and the prolonged global energy crisis, according to the latest monthly report by the General Economics Division (GED).

The Economic Update and Outlook (March 2026), released today, shows remittance earnings have risen significantly year-on-year in recent months. This suggests structural improvement, although short-term volatility persists.

In December, remittances climbed to $3.22 billion from $2.64 billion a year earlier. The trend continued into January, with inflows reaching $3.17 billion compared to $2.19 billion in the same month last year.

In February, remittances stood at $3.02 billion, marking a 19.4 percent increase from $2.53 billion recorded in the corresponding month of the previous fiscal year.

The GED report notes that this sustained growth has provided crucial support to the balance of payments at a time when Bangladesh is grappling with elevated import costs, particularly for fuel and energy.

“In the context of the energy crisis, remittances play a critical role in offsetting higher import payments and supporting reserve accumulation,” the report said.

At the same time, the GED cautioned against over-reliance on remittances.

A significant portion of Bangladesh’s migrant workforce is employed in energy-exporting countries, particularly in the Middle East, making flows vulnerable to external shocks, including geopolitical tensions, oil price fluctuations, and changes in labour market demand in host economies.

“Any disruption in these economies could directly affect migrant employment and, consequently, remittance inflows,” the report warned.

Seasonal factors and continued migration are expected to sustain inflows in the short term.

“But over the medium term, the outlook will depend heavily on global economic conditions and the stability of overseas labour markets,” it added.

The GED also said Bangladesh’s foreign exchange reserves strengthened in early 2026, but rising global energy prices could challenge the sustainability of these gains.

Gross reserves increased to $35.11 billion in February 2026 from $33.19 billion in December 2025, while BPM6 reserves rose from $28.58 billion to $30.36 billion during the same period.

The report attributed this buildup to strong short-term inflows and improved external liquidity, but warned that the ongoing energy crisis could accelerate reserve drawdown.

“Rising fuel import costs, a major component of Bangladesh’s import basket, could increase pressure on the country’s foreign exchange reserves,” the GED report said, adding that higher import bills may strain the taka and risk currency depreciation if not managed effectively.

The report urged a balanced policy approach, combining measured exchange rate adjustments, import rationalisation, and strategic reserve management.

Drawing lessons from other economies, the GED suggested that a mix of demand management and external financing could help Bangladesh maintain reserve adequacy while supporting overall macroeconomic stability.