In the world, remittances show one of major international financial resources, which sometimes they exceed the flows of FDI. For centuries, there in the developing countries, have been heated debates on the sources of economic growth and also why some countries reflect strong economic growth comparing to others. Furthermore, the United Nations’ Sustainable Development Goals (SDGs) for many struggling families and communities in developing countries, examine remittances as a lifeline. To provide food for families, access quality education and health services, also sanitation and clean water remittance are directly utilized.
Compared to foreign aid, the household-to-household nature of remittances makes remittances a significant and direct vehicle in achieving accelerated poverty reduction. In developing countries indeed, there is strong and unambiguous evidence that supports the argument that remittances alleviate poverty.
| Remittance Flows To Low- And Middle-Income Regions Growth Rate (%) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Details | 2018 | 2019 | 2020 | 2021 | 2022 | 2023e | 2024f | 2025f |
| Low- and middle-income countries | 9.7 | 5.0 | -1.1 | 10.8 | 8.3 | 0.7 | 2.3 | 2.8 |
| East Asia and Pacific | 6.9 | 4.0 | -8.0 | -2.5 | 2.8 | 1.8 | 0.9 | 1.4 |
| excluding China | 8.3 | 6.4 | -3.4 | 4.5 | 7.4 | 4.8 | 3.2 | 3.4 |
| Europe and Central Asia | 12.9 | 5.2 | -7.0 | 15.4 | 18.1 | -10.3 | -1.9 | 3.6 |
| Latin America and Caribbean | 9.9 | 8.2 | 7.4 | 26.2 | 10.5 | 7.7 | 2.7 | 1.6 |
| Middle East and North Africa | 1.8 | 3.9 | 4.1 | 12.8 | -3.2 | -14.8 | 4.3 | 5.5 |
| South Asia | 12.3 | 6.1 | 5.2 | 6.7 | 12.4 | 5.2 | 4.2 | 4.1 |
| Sub-Saharan Africa | 17.1 | 0.9 | -13.8 | 18.7 | 6.8 | -0.3 | 1.5 | 1.5 |
In 2023 remittances slowed, but they are expected to grow faster in 2024, the World Bank said in its latest Migration and Development Brief report. After a period of strong growth during 2021-2022, officially recorded remittance flows to low- and middle-income countries (LMICs) moderated in 2023, reaching an estimated $656 billion.
Statistics showed that in 2024 remittances to LMICs are expected to grow at a faster rate of 2.3 per cent, although this growth will be uneven across regions. Downside risks to those estimates include weaker than expected economic growth in high-income migrant-hosting states, volatility in oil prices, and currency exchange rates. Our neighbouring country India received remittances worth $120 billion in 2023, supported through strong labour markets in Europe and United States. Reduced outflows from GCC countries, amid falling oil prices and production cuts, contributed to the slowdown. Remittances are projected to rise marginally to $124 billion in 2024 and to $129 billion in 2025. India remained the top recipient among remittance-recipient countries, followed by Mexico ($66 billion), China ($50 billion), the Philippines ($39 billion), and Pakistan ($27 billion). India also remained the largest origin countries of emigrants (18.7 million), followed by Ukraine (11.9 million), China (11.1 million), Mexico (11 million), and República Bolivariana de Venezuela (8.9 million).
Economists recorded that remittances can impact growth absolutely via investment and access to credit. Specifically, in a typical developing country where labor supply is abundant but opportunities for formal employment are limited, remittances can assist initiate self-employment. It is also said that remittances can facilitate the growth of new small-scale businesses and foster entrepreneurship through relaxing credit constraints, which is common in the informal sector of developing states.
Remittances can hurt the recipient economies by fostering conspicuous consumption and discouraging saving. Furthermore, for low-wage worker who receive remittances, if the amount of remittances surpasses the recipient’s expected earnings from work, this external income flow can discourage labor force participation, induce voluntary unemployment and foster a culture of dependency in the recipient countries. Given these broad and varying channels of remittances and different country characteristics, it is stringent to assume that the impact of remittance on output is the same across countries. A natural and practical assumption instead would be that the remittance-output relationship is different across countries.
In the developing countries like Pakistan presently remittance inflows in the country clocked in at $2.995 billion in July 2024, 5 per cent lower on a month-on-month basis when compared to $3.158 billion in June 2024. Pakistan collected $30.3 billion in fiscal year 2023-24 (FY24), 10.7 per cent higher on a year-on-year basis.
Overseas Pakistanis in Saudi Arabia remitted the largest amount in July 2024 as they sent $761 million during the month. The amount fell by 6 per cent on a monthly basis, but was 56 per cent up than the $487 million sent by the expatriates in the same month of the previous year. Inflows from the United Arab Emirates (UAE) also fell 7 per cent on a monthly basis, from $654 million in June to $611 million in July. However, on a yearly basis, remittances enhanced by 94 per cent, as compared to $315 million recorded in same month last year. Statistics also showed that remittances from the United Kingdom amounted to $443 million during the month, a decline of 9 per cent compared to $487 million in June 2024. Meanwhile, remittances from the European Union enhanced nearly 6 per cent month-on-month as they amounted to $351 million in July 2024. Overseas Pakistanis in the US sent $300 million in July 2024, a month-on-month decrease of 7 per cent.