They are not only important source of valuable foreign exchange for the Less Developing Countries in general and Pakistan in particular, but are also a source of poverty reduction and enhancement of human capital. In Pakistan, research on international migration has primarily focused on investigating the magnitude and demographic profiles of the out-migrants. More recently, however, the implications of migrant manpower at the macro-level; such as employment of labor force, GNP growth, private savings, private investment, consumption, and balance of payments have also been investigated.
Moreover, the uses of remittances by migrants’ households and by migrants themselves, on return, has been the subject of much empirical research to search not only for incentives and policy prescriptions but also to channeled these resources into productive uses. Foreign remittance can be defined as ‘the purchase and sale of freely convertible foreign currencies as admissible under Exchange Control Regulations of the country’. A looser translation is the sending of money home while working in a foreign country.
Thousands of people are currently working and living in a country that is not their home, and sending funds regularly back to their families in their home country. A remittance is a transfer of money by a foreign worker to his or her home country. Note that in 19th century usage a remittance man was someone (often a black sheep) exiled overseas and sent an allowance on condition that he not returns home. Money sent home by migrants constitutes the second largest financial inflow to many developing countries, exceeding international aid.
by: Woo Tai Kwan (First prize winner in the STAR 25 th anniversary essay competition (Category C - adults) Should a fairy godmother suddenly appear before me with a crystal ball, a magic wand and a world atlas, and give me the liberty to select the country I'd like to live in 25 years from now, without a second's hesitation, I would point to that small nondescript, elongated peninsula straddling ...
Estimates of remittances to developing countries vary from International Fund for Agricultural Development’s US$301 billion (including informal flows) to the World Bank’s US$250 billion for 2006 (excluding informal flows).
Remittances contribute to economic growth and to the livelihoods of people worldwide. Moreover, remittance transfers can also promote access to financial services for the sender and recipient, thereby increasing financial and social inclusion. Remittances also foster, in the receiving countries, a further economic dependence on the global economy instead of building sustainable, local economies.
Modes of Transferring Remittances Modes of transferring| Advantages| Disadvantages| Informal via hundi (through money changer)| Speedy, low transaction cost, easy for receiver with difficulties in reading and writing| Less reliable, may take longer time due to new increased regulations. | Informal by hand| Speedy, no transactions cost| Risky, limited amount due to country- specific regulations. | Formal through financial institutions| Reliable, safe, documented, traceable| High transaction cost, time-consuming, formal process, generally available only in well established towns/cities. Importance: Remittances are playing an increasingly large role in the economies of many countries, contributing to economic growth and to the livelihoods of less prosperous people (though generally not the poorest of the poor).
According to World Bank estimates, remittances totaled US$414 billion in 2009, of which US$316 billion went to developing countries that involved 192 million migrant workers. For some individual recipient countries, remittances can be as high as a third of their GDP.
As remittance receivers often have a higher propensity to own a bank account, remittances promote access to financial services for the sender and recipient, an essential aspect of leveraging remittances to promote economic development. The top recipients in terms of the share of remittances in GDP included many smaller economies such as Tajikistan (45%), Moldova (38%), and Honduras (25%).
Economic and Monetary Union (EMU) is a single currency area within the European Union single market in which people, goods, services and capital move without restrictions. It creates the framework for economic growth and stability and is underpinned by an independent central bank and legal obligations on the participating Member States to pursue sound economic policies and to coordinate these ...
In September 2008, the World Bank established the first international database of remittance prices. The Remittance Prices Database provides data on sending and receiving remittances for 200 “country corridors” worldwide.
The “corridors” examined include remittance flows from 28 major sending countries to 86 receiving countries, which account for more than 60% of total remittances to developing countries. The resulting publication of the Remittance Prices Database serves four major purposes: * benchmarking improvements * allowing comparisons across countries * supporting consumers’ choices * putting pressure on service providers to improve their services Impact of Remittances on an Economic Insecurity: On balance, there is evidence of remittances smoothening household consumption and reducing poverty.