Remittances and economic stability

At a time when the world is facing a bleak outlook, remittances are a vital lifeline for households in developing countries, especially the poorest. Remittances are primarily money that migrants send home to support their families. They reduce poverty, improve nutritional outcomes and are associated with higher birth weight and higher enrollment rates among disadvantaged families.

Studies show that remittances help beneficiary families build their resilience, for example by financing their relocation to better housing and recovery from losses suffered after disasters.

At the macroeconomic level, remittances have a countercyclical effect, reducing uncertainties in growth rates and helping countries absorb shocks at the policy level. At the microeconomic level, remittances enable poor families to improve health and educational outcomes for their children, increase their savings, and increase their spending on consumer durables and their human capital. Based on the above, transfers should be welcomed, encouraged and even facilitated.

The flow of dollar remittances continues to increase despite the economic difficulties, although it is not keeping pace with the rise in inflation according to the latest economic data. In 2022, remittance flows to low- and middle-income countries are on track to reach $626 billion, up from $597 billion in 2021, surpassing foreign direct investment inflows and tripling official development assistance. But the actual volume of remittances, including unrecorded flows through informal remittance channels, is much higher. In sub-Saharan Africa, remittances are estimated to grow by 5.3 percent in 2022, on the back of a 16.4 percent growth rate in 2021.

We are committed to increasing remittances for millions of poor people and communities around the world.

Major countries such as China, Egypt, India, Mexico, Nigeria and the Philippines are expected to be the largest recipients of remittances. In terms of percentage of GDP, the largest countries receiving remittances are the smallest and poorest countries suffering from economic difficulties and conditions of instability, namely: Lebanon “38 percent of GDP,” Samoa “34 percent” and Tajikistan “32 percent .” cent” and Tonga “50 percent”. During the height of the COVID-19 pandemic, remittances were affected by quarantines and travel bans, but only for a short period.

The resilience of remittances during this pandemic and previous financial crises and natural disasters is primarily due to the determination of migrants to send money home to help families in need. Digital technologies provide much faster and cheaper remittance services, since the start of the pandemic saw a sharp increase in the use of digital channels for remittances. However, digital channels account for less than 1 percent of the total volume of transactions, dominated by money transfers. New remittance service providers face restrictions on access to correspondent banks due to the costs associated with complying with AML/CFT activities.

As soon as the corona crisis began, he called on the World Bank to recognize the importance of remittance services as essential and indispensable services and called for more efforts to increase financial inclusion for the poor and improve the access of new money transfer companies to correspondent banking services.

The international community and the G20 have recognized the importance of increasing the amount of remittances and reducing their costs, since reducing remittance costs to 3 percent by 2030 is one of the global goals set in this regard. Currently, the average cost of sending money to most African countries is more than double that level. Remittance costs can be reduced by increasing competition in remittance markets, improving access to bank accounts, and avoiding exclusive partnerships between money transfer companies and national post offices. Remittances through official channels can also be encouraged by resorting to prudent macroeconomic policies that avoid the application of multiple exchange rates in remittance-receiving countries.

The coronavirus pandemic and the war in Ukraine have highlighted the need for frequency and timeliness of data. Under the auspices of the Global Knowledge Partnership on Migration and Development, and in collaboration with 45 countries, the World Bank launched the Statistical Database, an international working group to improve data on remittance flows.

As we are committed to increasing remittances for millions of poor people and communities around the world, this could prove to be a key factor in sustaining national economies in times of greatest need.

* Quoted from Al-Eqtisadiah newspaper.