The World Bank noted that remittances surpassed foreign direct investment (FDI) and official development assistance (ODA) last year. Remittances to LMICs are expected to grow at a faster rate of 2.3 percent in 2024, although this growth will be uneven across regions.
In 2023, international statistics revealed that the Remittances to East Asia and Pacific, excluding China, increased by 4.8 percent to $85 billion. Remittances are crucial for Pacific Island economies like Palau, Samoa, Tonga, and Vanuatu. Notably, Tonga was the most dependent worldwide, with remittances amounting to 41 percent as a share of the Gross Domestic Product (GDP).
Excluding China, remittance flows to the region in 2024 are projected to grow by 3.2 percent. The cost of sending $200 to the region averaged 5.8 percent in late 2023, with costs as high as 17.1 percent in the most expensive corridor. Statistics also showed that last year remittances to Europe and Central Asia declined by 10.3 percent to $71 billion. The fall was driven by reduced transfers from Russia to many Central Asian countries. Additionally, the Russian invasion of Ukraine contributed to weaker-than-expected remittances to Russia and Ukraine. In 2024 Remittance flows to the region are projected to fall by 1.9 per cent. The cost of sending $200 to the region (excluding Russia) averaged 6.7 percent, up from 6.4 percent a year before. In Latin America and the Caribbean, remittance growth slowed to 7.7 percent in 2023, reaching $156 billion, supported by a strong US labour market. Mexico attained $66.2 billion, a 7.8 percent grow, sustaining its position as the top recipient in the region. Growth varied broadly; from a 44.5 percent grow in Nicaragua to a 13.4 percent fall in Argentina. Flows are expected to grow by 2.7 percent in 2024. The cost of sending $200 averaged 5.9 percent, largely unchanged from the last year.
In 2023, Remittances to the Middle East and North Africa declined by 15 percent to $55 billion, mainly because of a sharp fall in flows to Egypt. Official remittance flows to Egypt are recorded to have rebounded once the exchange rates were unified in March 2024. Remittance flows among countries in the region were impacted by slower growth in the GCC countries. Flows are projected to recover by 4.3 percent in 2024. The cost of sending $200 to the region averaged 5.9 percent, down from 6.7 percent a year before.
Furthermore, remittances to South Asia increased by 5.2 percent in 2023, standing at $186 billion, tapering off from a 12 percent increase in 2022. Growth was driven by India, which saw a 7.5 percent increase to $120 billion, supported by strong labor markets in the US and Europe. Reduced outflows from the GCC countries, impacted by falling oil prices and production cuts, contributed to the slowdown. Flows are projected to increase by 4.2 percent in 2024. The cost of sending $200 to the region averaged 5.8 percent, up from 4.2 percent a year before.
Remittance flows to Sub-Saharan Africa reached $54 billion in 2023, a slight decline of 0.3 percent. Remittances supported the current accounts of various African states that were dealing with food insecurity, drought, supply chain disruptions, floods, and debt-servicing difficulties. Countries heavily dependent on remittances include the Gambia, Lesotho, Comoros, Liberia, and Cabo Verde. Flows are projected to grow by 1.5 percent in 2024. Sending $200 to the region cost an average of 7.9 percent, almost unchanged from a year before.
In developing countries like Pakistan, in an optimistic development for Pakistan’s economy, the State Bank of Pakistan (SBP) has presently noted that remittances for October 2024 are expected to stand or surpass $3 billion. This trend, revealed during the recent post-Monetary Policy Committee (MPC) briefing, is poised to significantly reduce the current account deficit to negligible levels. The anticipated remittance statistics will be officially released shortly, but preliminary figures show an extraordinary 39 percent grow in remittances during the first three months of the current fiscal year 2025.
Notably, this surge is occurring without the usual boost from Eid, underscoring the resilience of financial inflows from overseas Pakistanis. The inflow of overseas workers’ remittances clocked in at $2.849 billion in September, a massive 29 percent higher on a year-on-year (YoY) basis when compared with $2.208 billion in the same month of the previous year. On a month-on-month (MoM) basis, the inflow in September was 3 percent lower when compared to $2.943 billion in August 2024. Economists attribute this sustained momentum to a stable exchange rate and the successful crackdown on informal remittance channels, mainly the hundi system.
The influx of remittances by official channels, counting banks and regulated exchange firms, has fostered greater trust in the financial system and encouraged overseas workers to send money by formal means. No doubt as remittances continue to flow robustly, their impact on the current account balance cannot be overstated. With the expected October statistics, the State Bank’s projections explain a promising viewpoint for the economic stability of the country, offering essential support to households and contributing to Pakistan’s foreign exchange reserves.