Low Oil Prices Could Harm Bangladesh’s Economy: Experts

Plummeting oil prices over time will likely hit a Bangladeshi economy that relies on remittances from migrant workers concentrated in petroleum-producing countries, economists warn.

Bangladesh’s migrant workforce numbers 9 million worldwide, but so far there has not been a noticeable decline in demand for such workers in the oil-based economies of the Mid East and Persian Gulf, experts say.

Remittances – packets of money wired back to Bangladesh from migrants to help their families at home make ends meet –have not declined significantly. Still, there are troubling signs that sharply lower oil prices could harm Bangladesh’s economy over the long term by cutting into remittances, they say.

“If the price slide continues, we are likely to see the impact on the remittance in the long run,” Nasneen Ahmed, an economist and research fellow at the Bangladesh Institute of Development Studies (BIDS), told BenarNews.

Prices for Brent crude, the global standard, have fallen well below U.S. $100 per barrel in the past two years. According to data from the Organization for Petroleum Exporting Countries (OPEC), the price for a barrel of Brent crude was selling for $38 in December 2015 compared with $111 per barrel in December 2013.

Remittances represent a significant portion of Bangladesh’s revenue from imports, which exceed revenue from exports, and revenue from remittances has contributed to the country’s foreign exchange swelling to U.S. $27.45 billion, according to government data.

Last year, Bangladeshi migrants working in the Gulf, Middle East, Malaysia and Singapore sent home more than U.S. $15 billion in annual remittances. A third of that amount comes from Bangladeshis working in Saudi Arabia.

“We have yet to see that our workers are returning home after job losses since the oil price slump,” said Ahmed, who specializes in the labor market.

That said, she believes that future job opportunities could dry up for Bangladeshis working in countries including the Saudi kingdom whose economies rest on petroleum production.

Nonetheless, there could be a silver lining to drastically lower oil prices, according to Q.K. Ahmad, a past president of the Bangladesh Economic Association (BEA).

“Fuel prices determine commodity prices. As we are an oil-importing country, the oil price fall will make our essential commodities cheaper. It will help the poor and the lower-income group of people more,” he told BenarNews.

But remittances are also vital to the health of the nation’s economy, he warned, saying that efforts to keep the value of the taka strong against the American dollar could reduce the volume of remittances.

“Remittances help us meet the deficit between our annual imports and exports. We have to ensure the steady flow of remittances,” Ahmad said.

The volume of remittances may soon be buoyed by this week’s approval by Bangladesh of a bilateral labor agreement with Malaysia, by which the Southeast Asian nation agreed to take in 1.5 million documented Bangladeshi workers.

Calls for government action

During a parliamentary committee meeting on energy policy on Tuesday, MP Atiur Rahman Atik said that average citizens were not benefitting fully from lower oil prices.

“We should adjust the fuel price in a way so that common people can get the benefits. The government increases the fuel prices as the international market goes up,” he told BenarNews after the meeting.

Meanwhile, Bangladeshis say they are feeling the pinch of receiving less money through remittances as a result of the government’s policy of not devaluing the taka against the dollar.

“I earn 900 Singapore dollars [50,760 takas] per month. I used to get 63 takas against one Singapore dollar. Now, [the exchange rate] has come down to 56 takas. This is a loss for us. The government should devalue the Taka for us,” Mohammad Khorshed, an expatriate worker and cleaner in Singapore, told BenarNews by phone.

Falling values in foreign currency as a result of lower oil prices is hurting the economy in Bhanga, a sub-district in Faridpur, a district in central Bangladesh, locals say.

“Most of the men in Bhanga are expatriates. Families here depend on the remittances. I used to sell 100,000 takas [$U.S. 1,269] per day two years ago, but it has come down to 60,000 takas [U.S. $761] at present,” Abdul Wahed, who owns a grocery store in Bhanga, told BenarNews.

A buyer, Abdul Malek, whose son work in Saudi Arabia, told BenarNews that his son used to send home 20,000 takas (U.S. $254) per month.

“But now I get 17,000 takas [U.S. $216],” Malek said.