1. Workers’ Remittances An Important and Stable Source of Development Finance Dilip Ratha International Conference on Migrant Remittances London October 9th, 2003

2. Outline Rising importance of workers’ remittances Pros and Cons
Policy issues

3. Remittances have become a key source of global development finance
$ billion 2002
FDI flows 135
Private debt flows
Official finance
Workers’ remittances

4. Main providers of remittances
Outward workers’ remittance payments
To all countries, $ billion
United States
Saudi Arabia
1972
1977
1982
1987
1992
1997
2002

5. Main providers of remittances
Outward workers’ remittance payments
To all countries, $ billion
United States
Saudi Arabia
1972
1977
1982
1987
1992
1997
2002
Remittances rise with migration and income

6. Migration will increase in the long-term
Income gap between source and destination countries is wide
Dependency ratios and pension costs are rising in industrial countries
Temporary, and South-South, migration to increase

7. Pros: Remittances are stable
Capital flows to developing countries
$ billion

8. And more evenly distributed: Although top recipients are large countries….
$ billion, 2002

9. Smaller countries receive more remittances as a share of GDP
Remittances as % of GDP, 2002

10. Cons: Remittances may…

11. Cons: Remittances may…
…finance “unproductive” spending

12. Cons: Remittances may…
…finance “unproductive” spending
…promote idleness among recipients

13. Cons: Remittances may…
…finance “unproductive” spending
…promote idleness among recipients
…raise inequality in the middle-income range

14. Cons: Remittances may…
…finance “unproductive” spending
…promote idleness among recipients
…raise inequality in the middle-income range
…lead to currency appreciation and Dutch disease

15. Policy issues

16. Policy issues
Recognize that remittances are person-to-person flows

17. Policy issues Recognize that remittances are person-to-person flows
Improve data reporting

18. Policy issues Recognize that remittances are person-to-person flows
Improve data reporting
Encourage flows through formal sector

19. Remittance costs are high and regressive
Charge

20. Improve migrants’ access to banks

21. Improve migrants’ access to banks

22. Strengthen financial infrastructure

23. Strengthen financial infrastructure
Clearing house arrangement

24. Strengthen financial infrastructure
Clearing house arrangement
Improve transfers to rural areas – tie up with POSBs

25. Strengthen financial infrastructure
Clearing house arrangement
Improve transfers to rural areas – tie up with POSBs
Increase transparency and competition

26. Strengthen financial infrastructure
Clearing house arrangement
Improve transfers to rural areas – tie up with POSBs
Increase transparency and competition
International cooperation may be needed

27. Improve investment climate in recipient countries
Remittances as % of GDP,
High Low
Corruption
Inequality
M2/GDP
Trade/GDP

28. Summary
Remittances have become an important – and stable - source of global development finance
Increasing remittances would require strengthening the financial infrastructure and improving the investment climate