Remittances on the rise: financial lifeline for poor countries and a reflection of global disparities
During 2023, remittances worldwide have experienced a remarkable growth trend.
According to World Bank studies, the flow of remittances has increased by 1.4%, particularly in low- and middle-income countries. However, the international organization assures that the economy of remittance-sending countries could experience a decline, which could be reflected in the jobs and wages of migrants, based on the latest analysis on migration and development.
By 2022, remittance flows increased by 8% to USD 647 billion. Since the end of the pandemic, remittances have become more relevant, especially in weak economies experiencing economic slowdown.
In the case of Colombia, in the first quarter of 2023 the country received a total of US$2.476 billion in remittances. This is equivalent to an average of almost US$28 million per day. With respect to the same period of 2022, remittances reached an increase of 21%, since last year $2,045 million dollars were reported in remittances to the Colombian territory.
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What is happening with remittances in the global landscape?
The post-pandemic scenario has been characterized by a notable reduction in foreign direct investment, as well as by an increase in remittances to low- and middle-income countries.
On the other hand, the World Bank has said that what ends up happening with remittance-sending countries is that they become a resilient source of external financing, whose money produced does not circulate within the territory but is redirected to lower-income countries.
While this is true, it is also true that remittances are the result of the regular or irregular migration of people of working age, who make valuable contributions to the economy of the receiving country with their effort, knowledge and work capacity. The money they send to their countries of origin is only a part of what they earn, and serves to support their families in their countries of origin.
Michal Rutkowski, global director of the World Bank’s Social Protection and Labor Global Practice, says that “remittances significantly complement government cash transfers and are critical to households in times of need”.
Los cinco países que más remesas recibieron en 2022 fueron
— Banco Mundial (@BancoMundial) August 21, 2023
🇮🇳 India (USD 111 000 millones)
🇲🇽 México (USD 61 000 millones)
🇨🇳 China (USD 51 000 millones)
🇵🇭 Filipinas (USD 38 000 millones)
🇵🇰 Pakistán (USD 30 000 millones)
Más datos en el informe del @BancoMundial y @globalknomad
What remittances looked like in 2022
In 2022, global remittances reached USD 647 billion, representing an 8% increase over the previous year, according to the Migration and Development Review published by the World Bank. This increase is related to factors such as the performance of the dollar and increased global migration.
In the same year, Europe and Asia received around 87 million international migrants, which became 61% of the world’s migrant population. Of course, the increase in the percentage of migration generated a consequent increase in remittances to the migrants’ countries of origin, which are mostly low-income.
So far in 2022, high oil prices have benefited remittance senders in the Gulf Cooperation Council (GCC) countries. In parallel, transfers from Russia to Central Asian countries increased considerably, according to World Bank analysis.
Remittance recipients tend to be low-income nations overall and with broad socio-economic difficulties compared to remittance-sending nations.
Overall, the picture of remittance flows in 2022 highlights the interconnectedness between the socioeconomic disparities of the nations involved, migratory movements, and financial transfers from rich to poor or middle-income countries.
Remittances by region
In 2022, remittances increased significantly. In East Asia and the Pacific, they increased by 0.7%, in Europe and Central Asia by 19%, in Latin America and the Caribbean by 11.3%, in South Asia by 12.2% and in Sub-Saharan Africa by 6.1%, according to the World Bank’s 2022 report.
In parallel, the opposite trend was evident in North Africa and the Middle East, as both regions experienced a 3.8% reduction in remittances, so says the World Bank.
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Top remittance recipients in the world
During 2022, India topped the list of largest remittance recipients in the world with USD 11 billion. Mexico closed the list with a total of USD 61 billion. China received USD 51 billion in remittances; the Philippines received USD 38 billion and Pakistan a total of USD 30 billion in remittances, according to World Bank reports.
In economies where remittances represent a significant share of Gross Domestic Product (GDP), such as Tajikistan (51% of GDP), Tonga (44%), Lebanon (36%), Samoa (34%) and the Kyrgyz Republic (31%), remittances are key to financing fiscal deficits.
On the importance of remittances in low- and middle-income countries, Dilip Ratha, lead author of the review and head of the Global Knowledge Partnership on Migration and Development (KNOMAD), said the following:
“In many economies, remittances have become a vital financial support during the pandemic and will become even more crucial in the foreseeable future. We have intensified collaboration with remittance source and recipient countries to improve data and leverage remittances to mobilize private sector capital through diaspora bonds and improved country credit ratings”.
In addition to the importance of remittances in the context of the global economy, the World Bank study analyzes the costs of remittances and the importance of promoting a collaborative approach between remittance sending and receiving countries to anticipate future economic challenges such as the Covid-19 pandemic.
In any case, the increase in remittances almost everywhere in the world hides some bad news: the economies of dozens of countries are sinking, and many of their inhabitants cannot find a way out other than migrating -regularly or irregularly- to support their families. The countries they leave benefit from the foreign currency they receive, but they lose one of their most valuable assets, if not the most important: their people.
With mass emigration, the population of working and wealth-producing age decreases, the population pyramid is affected, and social security systems face greater difficulties in sustaining themselves.
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