Remittance supports balance of payment

Remittance is noticeably supporting the balance of payment (BoP) in Nepal, according to latest issue of the World Bank’s Migration and Development Brief.

“In South Asia, remittances are noticeably supporting the balance of payments,” it said, adding that in Nepal, Bangladesh, Pakistan and Sri Lanka, remittances are larger than the national foreign exchange reserves. “All these countries – most notably Pakistan – have instituted various incentives for attracting remittances.

In Nepal too, the remitters have been asking the government to incentivise the Nepali migrant workers, who are helping keep economy afloat.

As a percentage of gross domestic production (GDP), the top recipients of remittances, in 2012, were Tajikistan (48 per cent), Kyrgyz Republic (31 per cent), Lesotho and Nepal (equivalent to 25 per cent each), and Moldova (24 per cent), it said, adding that The top recipients of officially recorded remittances for 2013 are India (with an estimated $71 billion), China ($60 billion), the Philippines ($26 billion), Mexico ($22 billion), Nigeria ($21 billion), and Egypt ($20 billion). Other large recipients include Pakistan, Bangladesh, Vietnam, and Ukraine.

Migrants from developing countries to send home $414 billion in earnings in 2013

The developing world is expected to receive $414 billion in migrant remittances in 2013, an increase of 6.3 per cent over a year ago in 2012, the World Bank estimated, adding that it is projected to rise to $540 billion by 2016.

Globally, the world’s 232 million international migrants are expected to remit earnings worth $550 billion this year, and over $700 billion by 2016, the World Bank’s Migration and Development Brief added.

The latest estimates reflect recent changes to the World Bank Group’s country classifications, with several large remittance recipient countries like Russia, Latvia, Lithuania and Uruguay no longer considered developing countries. In addition, the data on remittances also reflects the International Monetary Fund’s (IMF) changes to the definition of remittances that now exclude some capital transfers, affecting numbers for a few large developing countries like Brazil.

Growth of remittances has been robust in all regions of the world, except for Latin America and the Caribbean, where growth decelerated due to economic weakness in the US. Remittances to India are expected to reach $71 billion in 2013.

Cost of sending remittance still high

The Brief also highlights that the high cost of sending money through official channels continues to be an obstacle to the utilisation of remittances for development purposes, as people seek out informal channels as their preferred means for sending money home. The global average cost for sending remittances is nine per cent, broadly unchanged from 2012.
While remittance costs seem to have stabilised, banks in many countries have begun imposing additional ‘lifting’ fees on incoming transfers, including remittances. Such fees can be as high as five per cent of the transaction value.

Some international banks are also closing down the accounts of money transfer operators because of money laundering and terrorism financing concerns.