Migration rates are increasing year by year. Millions of people are migrating from less developed countries to more developed countries. People cross oceans, mountains, deserts, and what not to full fill their dream. A dream of having a decent job with a decent salary to support their family and their future. Most of the people who migrate have very little or no money in the pocket. Many of them either take a loan or use their family savings to go to developed countries either for higher education or for a job.
They have just one simple dream and that it to earn money for their family and send it back to them in times of economic/ financial crisis, to support education of their loved ones. They send money for healthcare, weddings, unexpected funerals which they can’t attend, or any sort of investment with a solid advice. Money send from developed nations to developing nations in this form is known as remittances.
Approximately 232 millions of international migrants are there in the world. These are people living in nations other than that of their birth. Population wise this figure is bigger than the population of Brazil. In economy wise it’s bigger or just near to economy of France. Out of 232 million people 180 million people are from poor or developing countries like India and Mexico.
According to a survey 413 billion dollar remittances were sent from developed countries to developing countries which are approximately three times of the development aid provided by the authorized government agencies to people. Remittances are often seen as a life saving drug for poor people in developing nations especially during an economic crisis or some natural disasters like tsunami, earthquakes, volcanic eruptions etc which disrupts the normal lifestyle of people.
One of the best example of it can be seen in Bangladesh where there is 45% of the population below poverty line but during the financial crisis of 2005 poverty level went down to 31%. It’s quite strange especially during a crisis. It was found that 50% of remittances were received by the country from neighbouring country India. So in such situations remittances acts like lifeblood to such nations.
Same situation can be traced down in countries like Somalia, Mexico, Egypt, Tajikistan etc. Remittances not only help in crisis but also increase the consumption demand of people in developing countries. Such nations get a huge cash flow in their economies, which lead to more imports to satisfy the consumer demands.
However at some places it’s not easy to send remittance to the native country because of strict money transfer laws and protocols. Internationally 8% of the money sent is charged as fees for money transactions. Many countries like Africa have put exorbitant cost of sending money because of the fear of money laundering. Such regulations curb remittances and governments have to understand that these are lifelines to some of the very poor country like Somalia.
However do remittances really help in getting economic stability? Can a country just survive only on remittances?
The answer to such questions is a big NO. Let’s take a case from gulf countries, In June 2014 when the oil prices fell globally, gulf countries didn’t made a profit which directly affected the workers and so the remittances sent from these countries fell. It was a blow not only to oil producing countries but also to families across south-east Asia and elsewhere those have breadwinners working in the Gulf. It proved to be a structural shock for Lebanon, a small economy in which families and the banking system are heavily dependent on inflows from the remittances.
Remittances have other side effects too such as by helping to subsidise low incomes at home they provide a cushion against the impact of slow growth, which eases pressure on governments to reform their policies. And, by channelling capital into consumer spending, remittances boost imports – which, some economists say, holds back the development of domestic manufacturing. So with just support of remittances no country in the world can rise from its poverty level.
In fact government of developing countries should make such policies and plans so that they can be less dependent on remittances. Because if at some point of time the host country gets hit hard economically then this will directly affect to migrants family in the form of lower remittances This can export the slowdown to the recipient country, fuelling economic instability on a global scale as we have seen above the case of gulf country.
So in general I think remittances should be given to developing nations however it’s the job of government and policy makers there to make their country economically stable without the help of remittances. And in extremely poor countries like Somalia there should be an open partnership to lower the cost of money transfer as they did in telecommunication sector. From 8% it should be reduced upto 2% which would help to save millions of dollar and some more help can be provided to such nations.
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