Remittances and other financial flows to developing countries

Remittances and other financial flows to developing countries

Remittances from migrants more important than aid

This paper examines the flows of migrants' remittances in relation to other financial flows to developing countries. Since remittances by unofficial channels by all estimates are significant, the remittance amounts reported here are quite conservative. Official estimates of migrants’ remittances are in the order of US$ 100 billion annually, some 60 percent of which go to developing countries. Any policy to make use of migrants as a development resource will have to understand the size and allocation of remittances and the roles played by migrants and their communities in the remittance processes.

The main findings of the paper are:

  • annual remittances to developing countries have more than doubled between 1988 and 1999 and are 20% more than ODA
  • remittances are a more constant source of income to developing countries than other private flows and foreign direct investments
  • remittances to developing countries go first and foremost to lower-middle income and low-income countries
  • among the ten countries receiving most remittances, two are low-income (India and Pakistan); six are lower middle-income (Philippines, Turkey, Egypt, Morocco, Thailand and Jordan); and two are upper middle-income (Mexico and Brazil). In relation to their GDP, the main beneficiaries of remittances are selected countries in the Middle East, North Africa, Central America and the Caribbean
  • refugees are also migrants remitting a share of their income. However, official statistics do not allow a separate assessment of the size of remittances by refugees
  • sub-Saharan Africa received some 8 percent of remittances in 1980, but only some 4 per-cent in 1999. South Asia’s share also declined, but from 34 to 24 percent
  • a number of developing countries rely much more on remittances than on aid. For example, the relations between the two forms of inflows are 39:1 in Turkey; 34:1 in Mexico; 24:1 in Costa Rica; 15:1 in Jamaica; 8:1 in the Philippines; 7:1 in Nigeria; 6:1 in India; 5:1 in Tunisia; and 4:1 in Lesotho

These findings point to important trends regarding the size and geographical distribution of remittances, showing great potential for supplementing aid and other flows to particular countries with large diasporas in industrial countries. However, different sources of information are needed to understand the targeting of remittances among ethnic and social groups and economic purposes within individual developing countries.

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