REMITTANCES AND HUMAN DEVELOPMENT

Remittances and Human Development: Effects and Implications

Remittances and Human Development: Effects and Implications

Overview and Definitions

International migration transforms not only the destiny of individual migrants but also the conditions of their families in the respective sending communities. Remittances have become the most visible evidence and yardstick for the ties connecting migrants with their societies of origin. Because of their importance to the economy of labour exporting countries, monetary remittance flows nevertheless tend to be the only measured aspect of the migration experience. In 2003, the Global Development Finance Annual Report took formal notice of remittances as a source of external development finance for the first time. Estimated at over US$ 72 billion in 2000, remittances to developing countries represent a large proportion of world financial flows and amount to substantially more than global official development assistance, more than capital market flows and more than half of foreign direct investment flows to these countries. To underline their importance for the developing world, it is estimated that in 2000 60 per cent of global remittances were sent to developing countries. Lower middle-income countries apparently receive the largest amounts, but remittances may constitute a much higher share of the total international capital flow to low-income countries (Gammeltoft, 2002). To further underline the development dimension of migrant transfers, remittances seem to be more stable than private capital flows and to be less volatile to changing economic cycles (Ratha, 2003: 160). It may, therefore, be concluded that monetary remittances play a most important role in the accounts of many developing countries and are crucial to the survival of poor individuals and communities around the world.

International Levels and Trends

A recent study commissioned by the Multilateral Investment Fund of the Inter-American Development Bank (Orozco, 2003a) estimates the worldwide flows of remittances by region in 2002. The study concludes that Latin America and the Caribbean are the main recipient areas of remittances in the world, receiving about 31 per cent of total flows. South Asia is the second-largest remittance recipient area (20%), followed by the Middle East and North Africa (18%), East Asia and the Pacific (14%), Europe and Central Asia (13%) and Southern Africa (5%).

An interesting finding is that one or two countries in each region receive over 50 per cent of the total flow to the region. For example India, the world's largest remittance recipient country, accounts for 73 per cent of the total flow to South Asia; Mexico accounts for 34 per cent of the flow to Latin America and the Philippines for 43 per cent of the flow to East Asia and the Pacific. Another interesting finding is that sixteen countries share three-quarters of the total global flows:

The Global Development Finance 2003 Annual Report makes a very conservative calculation of remittances based on official IMF balance of payments data. Even so, the report estimates that US$ 72.3 billion went to developing countries in 2001. Of these, Latin America received US$ 25 billion (Mexico alone ...