One of the things that always surprised my students in human security and peacebuilding was how much international development was effectively do-it-yourself development, funded by migrants who worked abroad and sent money home. Most people think that development is largely funded by governments or business investment, but it is not so – remittances sent home are three times higher than official development assistance.
And in times of crisis, like the pandemic, those migrants effectively become economic first responders, Western Union said in a report earlier this year – because in times of crisis, those remittances they send home actually go up, not down.
Now we have some concrete evidence that this is true. The World Bank’s Migration and Development group says that remittances to low- and middle-income countries are projected to have grown by 7.3%, reaching $589 billion in 2021, despite the pandemic.
Dilip Ratha, the economist who first drew the world’s attention to the importance of remittances two decades ago, says:
“It is remarkable to see the recovery in remittance flows in 2021, proving again their reliability as an absolute lifeline for families of migrants back home, especially in times of need.
“In 2021, we expect remittance flows to low- and middle-income countries (LMICs) to reach $589 billion in 2021, a 7.3% increase over 2020. Remittances now stand more than threefold above official development assistance and, excluding China, more than 50% higher than foreign direct investment.
“This recovery follows the resilience of flows seen in the second half of 2020 which almost compensated for the disruption suffered during the second quarter; flows for the year recorded only a modest 1.7 percent decline in the face of one of the deepest global recessions.
“Growth in remittance flows has been exceptionally strong (21.6%) in Latin America and the Caribbean. In most other regions, remittances have also recovered strongly, registering a growth of 5 to 10% in Europe and Central Asia, the Middle East and North Africa, South Asia, and Sub-Saharan Africa, but a slower pace of 1.4% in East Asia and the Pacific (excluding China).
“In all developing regions of the world, migrants stepped up their support to families back home, especially to countries affected by the spread of the COVID-19 Delta variant. Their ability to help was enabled by a welcome pickup in economic activity and employment in major migrant destination countries, grounded partly in the exceptional COVID-19 emergency fiscal stimuli and accommodative monetary policies.
“In 2021, the top five remittance recipients in current US dollar terms were India, China, Mexico, the Philippines, and the Arab Republic of Egypt. As a share of gross domestic product, the top five remittance recipients in 2021 were smaller economies: Tonga, Lebanon, the Kyrgyz Republic, Tajikistan, and Honduras. The United States was the most significant source country for remittances in 2020, followed by the United Arab Emirates, Saudi Arabia, and Switzerland.”
This is the second consecutive year in which remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment and overseas development assistance. Driven by COVID-19 and Hurricanes Grace and Ida, remittance flows into Latin America and the Caribbean will likely reach a new high of $126 billion in 2021, an increase of 21.6% over 2020.
Early in the year, when Western Union CEO Hikmet Ersek dubbed them ‘economic first responders’ and emphasized their important role in the countries where they work as well as the countries from which they come. Ersek said:
“The love and money they send across the world’s borders have helped smooth the economic shocks from the pandemic, fostering stronger resilience and recovery in their home nations throughout 2020, and into 2021 and beyond, than would have been the case without these flows.
“These global citizens provide an essential lifeline to their home communities by funding essential expenditures, lowering extreme poverty and supporting healthcare and education. They serve on the front lines within their host communities as medics, scientists, grocers, bus drivers, construction workers, teachers, and contribute human capital toward the functioning of a robust economy.
“These actions, during an unprecedented global pandemic, serve to shine an even bigger spotlight on the criticality of remittances and those who send them. They are the resilient and inclusive global economic force. Policymakers, development experts and economists must give cross-border remittances the consideration and priority they deserve as a significant global economic engine. There has simply never been a greater need for innovation and technology that provides the on-the-ground financial support flowing instantly across borders.”
Sources
Global Remittance Flows in 2021: A Year of Recovery and Surprises. Dilip Ratha, Nov. 17, 2021
Remittance Flows Register Robust 7.3 Percent Growth in 2021. World Bank, Nov. 17, 2021
The world’s “Economic First Responders” offer a lifeline for a post-pandemic recovery in developing economies. Hikmet Ersek, Jan. 27, 2021
Mountain of Money From New York Migrants Sustains Mexican Towns Through Pandemic. The City, Jan. 30, 2022.