The International Organisation for Migration (IOM) released its World Migration Report 2024, revealing that in 2022, India soared to the top of the remittances chart, receiving over USD 111 billion. This staggering figure not only secured India’s position as the largest recipient of remittances globally but also marked the first time any country has surpassed the USD 100 billion milestone.
South Asia, particularly India, Pakistan, and Bangladesh, stands out for its substantial inflow of remittances. The region, known for its significant migrant worker population, consistently ranks among the top recipients of international remittances worldwide. In 2022, Pakistan and Bangladesh claimed the sixth and eighth spots respectively, with Pakistan receiving nearly USD 30 billion and Bangladesh garnering around USD 21.5 billion.
What are remittances?
Remittances refer to the financial or in-kind transfers that migrants send directly to their families or communities in their home countries.
The World Bank gathers worldwide data on international remittances. Its data, however, does not capture unrecorded flows through formal or informal channels, and the actual magnitudes of global remittances are therefore likely to be larger than available estimates.
Over recent years, these transfers have experienced significant growth and currently stand as the primary source of foreign income for numerous developing economies.
The biennial report recorded USD 831 billion in international remittances globally in 2022 with USD 647 billion of it, being received by low- and middle-income countries.
India, with approximately 18 million international migrants, boasts the largest diaspora globally. Countries such as the United Arab Emirates (UAE), the United States, and Saudi Arabia host significant Indian communities. Moreover, India ranks 13th among destination countries for immigrants, with 4.48 million migrants. Notably, India features prominently in various international migration corridors, including those with the UAE, US, Saudi Arabia, and Bangladesh.
A typical remittance transaction takes place in three steps:
Remittances’ data defied pandemic forecasts
Contrary to initial dire forecasts, international remittance flows in 2020 showed a more positive outcome.
The World Bank predicted that global remittance figures would decline by 20 per cent due to COVID-19 in April 2020, revised to 14 per cent in October 2020, in comparison to pre-pandemic levels. However, remittance flows ended up declining by just 2.4 per cent globally, with USD 540 billion going to low- and middle-income countries in 2020, just 1.6 per cent below 2019 levels. In 2021, remittance flows grew by 7.3 per cent to reach USD 589 billion.
This unexpected trend was partly attributed to a shift from informal to formal channels in response to COVID-19 mobility restrictions, among other factors. Despite these challenges, the available data reflect an overall long-term upward trend in international remittances in recent years, escalating from approximately USD 128 billion in 2000 to USD 831 billion in 2022.
International remittances rebounded from the decline experienced in 2020 due to the COVID-19 pandemic. In 2022, migrants globally sent an estimated USD 831 billion in international remittances, marking an increase from USD 791 billion in 2021 and significantly surpassing the USD 717 billion recorded in 2020.
As observed in previous years, low- and middle-income countries continued to receive substantial remittance inflows, which surged by 8 per cent between 2021 and 2022, climbing from USD 599 billion to USD 647 billion.
Since the mid-1990s, international remittances have consistently exceeded official development assistance levels, defined as government aid aimed at promoting the economic development and welfare of developing countries. Moreover, they have recently surpassed foreign direct investment (FDI).
Which nations followed India?
While India leads the global remittance landscape, Mexico, China, the Philippines and France followed after, becoming the top five countries receiving remittances. With over USD 61 billion estimated in 2022, Mexico surpassed China, which historically held the second spot. China’s remittance inflow dwindled to around USD 51 billion, attributed to demographic shifts and stringent travel policies.
The only other G7 nation in the top 10, apart from France, is Germany. The report, however, says that it should be noted that the the majority of inflows to these two nations are not household transfers, but relate to salaries of cross-border workers who work in Switzerland while residing in France or Germany.
Which countries send the most remittances?
Traditionally, high-income countries serve as the primary origins of international remittances. Over the years, the United States of America has consistently held the position of the world’s leading remittance-sending country. In 2022 alone, the US recorded a total outflow of USD 79.15 billion.
Following closely behind are Saudi Arabia (USD 39.35 billion), Switzerland (USD 31.91 billion), and Germany (USD 25.60 billion). The UAE typically features among the top 10 sending countries globally; however, its data were not included in the June 2022 World Bank data release, says the report.
China, classified as an upper-middle-income country by the World Bank, has emerged as a significant source of international remittances, reporting USD 18.26 billion in 2022, which was a decline from USD 23 billion in 2021.
Is a nation’s economy reliant on remittances?
There is no unanimous definition of “overreliance” on international remittances; however, dependency on remittances is commonly assessed by examining the ratio of remittances to gross domestic product (GDP).
The top five countries in terms of remittance dependency, as measured by the share of GDP in 2022, were Tajikistan (51%), followed by Tonga (44%), Lebanon (36%), Samoa (34%), and Kyrgyzstan (31%).
The latest data shows that foreign remittances account for 3 per cent of India’s GDP.
International remittances remain significant to North Africa and are major sources of foreign exchange for several countries in the sub region, says the report.
Egypt is estimated to have received more than 28 billion USD in international remittances, making it the seventh largest recipient. Morocco, which ranks among the top 20 recipient is estimated to have received over USD 11 billion in 2022, accounting for 8 per cent of its GDP.
In South-east Asia as well, migrants from the Philippines are estimated to have remitted over USD 38 billion, the fourth largest figure globally, accounting for 9.4 per cent of the country’s GDP.
International remittances are also important to countries such as Nepal, where they make up nearly 23 per cent of national GDP.
Reliance on remittances to such a significant extent can foster a culture of dependency within the receiving country, potentially leading to reduced labour force participation and impeding economic growth. Moreover, excessive dependence on remittances renders an economy more susceptible to abrupt fluctuations in remittance receipts or changes in exchange rates.
What are the costs incurred during the transfer?
SDG 10.C underscores the commitment of countries to reducing the transaction costs associated with migrant remittances to less than 3 per cent. This target aims to establish a global average for sending USD 200.
While the expense of sending remittances has gradually decreased over recent years across various regions, it remains notably high, far surpassing the SDG 10 objective.
In 2022, the average costs were at their lowest in South Asia, standing at 4.6 per cent, followed by East Asia and the Pacific, and Latin America and the Caribbean, both hovering around 5.8 per cent. Conversely, Sub-Saharan Africa consistently bears the highest average cost of sending remittances, exceeding 8 per cent in 2022, more than double the SDG target.
SDG 10.C says: “By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.”
With inputs from agencies
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