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Abstract

Remittances and other Financial Flows to Developing Countries 

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. This paper examines the flows of remittances in relation to other financial flows to developing countries. The examination is based on data available from official statistics. As discussed in the paper, remittances by unofficial channels are by all accounts significant, so the remittance amounts reported here are quite conservative.

The paper shows that annual remittances to developing countries have more than doubled between 1988 and 1999. Viewed over the last decade, remittances have been a much larger source of income for developing countries than official development assistance (ODA). And the gap is increasing, since ODA has been falling while remittances have increased. Furthermore, remittances appear to be a much more stable source of income than private flows, both direct and portfolio, which tend to be more volatile and flow into a limited set of countries.

Remittances to developing countries go first and foremost to lower-middle income and low-income countries. Lower middle-income countries receive the largest amounts, but remit­tances constitute a much higher share of total international flows to 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).

Sub-Saharan Africa received some 8 percent of remittances in 1980, but only some 4 percent in 1999. South Asia’s share also declined, but from 34 to 24 percent. The ‘winners’ have been Eastern Europe and Central Asia, South and Central America and the Caribbean that have increased their share of global remittances.