Remittance Promote Macro-Economic Stability of Bangladesh

Remittances are characterized as a more stable and less cyclical form of capital flows, making them a good candidate to lower the risk of macroeconomic instability in the receiving country.[1]
Remittances have been categorized as ‘free launch’ in financial terms because, unlike debt financing or foreign direct investment, they do not generate any future financial obligations for the receiving countries. For instance, the report of the Inter-American Dialogue Task Force on Remittances emphasized how remittances promoted a steadily increasing stream of capital to Latin America and the Caribbean since 1998. The report writes:

Role of Remittance to reduce poverty in Bangladesh

Remittances make a powerful contribution to reducing poverty and vulnerability in most households and communities. The words of Adams are supportive to this view:
When the ‘poorest of the poor’ households receive international remittance, their income status changes dramatically and this in turn has a large effect on any poverty measure.[1]
To assess the impact of remittances on poverty reduction, it is necessary to examine whether remittances affect multidimensional aspects of household poverty.

Investment of Remittance in Bangladesh

Since the 1970s, remittances have been generally perceived to be largely spent on houses, food, cars, clothes, and important consumption goods, not on investments in productive enterprises. However, recently remittances have been increasingly used for investment purposes in developing countries, especially in low income countries. Adams, for example, finds that in Guatemala, the majority of remittance earnings are not spent on consumption goods. At the mean level of expenditures, households without remittances spend 58.9 percent of their expenditure on consumption goods compared to 55.9 percent on the part of households receiving international remittances.[1] He explains that households receiving remittances tend to view their remittance earnings as a temporary stream of income thus discouraging them from spending more on consumption.