Remittances to rebound
Inward remittances to Bangladesh may see “some rebound” in the coming years, bucking the slowing trend, as the inflow into South Asia is forecast to grow 22.5 percent to $136 billion in 2016 from last year, the World Bank said in a new report.
Migrants from developing countries are expected to send $436 billion in remittances to their home countries this year -- an increase of 7.8 percent over the 2013 volume -- despite more deportations from some host countries, according to the Migration and Development Brief released in Washington on Friday. It may rise to $516 billion in 2016.
Global remittances, including those to high-income countries, are estimated at $581 billion this year, from $542 billion in 2013, rising to $681 billion in 2016.
The main driver of growth in remittance flows is the expansion of incomes in the destination countries, the World Bank said.
"Exchange rate movements of world currencies also contribute significantly to the outlook for remittances expressed in US dollars," it said.
The impetus to migrate remains strong, as employment conditions are improving in source countries for remittances. Low costs of cash transfers and easy remitting systems are also providing a boost, the report mentioned.
In 2013, growth in remittances to South Asia has slowed, rising by a modest 2.3 percent to $111 billion, compared with an average annual increase of more than 13 percent during the previous three years, according to the report.
The slowdown was driven by a year-on-year decline in Bangladesh of 2.4 percent and a marginal increase in India of 1.7 percent in 2013.
In Bangladesh, the fall in remittances stems from a combination of factors, including fewer migrants finding jobs in the Gulf countries, more migrants returning home due to departures and deportations, and the appreciation of the taka against the dollar.
Only 96,068 people found jobs abroad in the three months to March against 107,626 in the same period of last year, government data shows. In March, overseas employment was also about 10 percent down from the same month a year earlier.
"Still, some rebound is projected in the coming years, with remittances across the region forecast to grow," the WB said of Bangladesh that received around $14 billion last year becoming the third largest recipient of remittances in South Asia, after India and Pakistan.
Bangladesh received $1.27 billion in remittances in March, the highest single month inflow since July.
The World Bank report concurs with the Economist Intelligence Unit (EIU) that expects Bangladesh's current account will remain in the black in 2014-18, largely due to remittances.
"Despite an anticipated drop in remittances in 2013, they will remain an important feature of the current account and will continue to make up the bulk of inward transfers," EIU said. Remittances will be equivalent to around 10 percent of nominal GDP.
Remittances remain a key source of external resource flows for developing countries, far exceeding official development assistance and more stable than private debt and portfolio equity flows, the World Bank said.
For many developing countries, remittances are an important source of foreign exchange, surpassing earnings from major exports, and covering a substantial portion of imports.
In Nepal, remittances are nearly double the country's revenues from exports of goods and services, while in Sri Lanka and the Philippines, they are over 50 percent and 38 percent.
India led the chart of remittance flows, receiving $70 billion last year, more than the $65 billion earned from the country's flagship software services exports. In Uganda, remittances are double the country's income from its main export of coffee.
"There is no doubt that these flows act as an antidote to poverty and promote prosperity. Remittances and migration data are also barometers of global peace and turmoil," said Kaushik Basu, chief economist of the World Bank.
The report notes that while the medium-term outlook for remittances is strong, downside risks loom mainly from migrants' return to their home countries as a result of conflict or deportation from host countries.
Last year saw an intensification of deportations, with more than 370,000 migrants sent back to their home countries from Saudi Arabia alone in the five months since November 2013.
Bangladesh was one of the countries that suffered the shock. Most of these migrants deported from the kingdom came from Ethiopia, Egypt and Yemen.
In the US, over 368,000 people -- mostly migrants seeking entry into the US and apprehended at the border -- were deported to their home countries in Latin America and the Caribbean, according to the report.
SAVINGS
“In addition to the large annual flows of remittances, migrants living in high income countries are estimated to hold savings in excess of $500 billion annually. These savings represent a huge pool of funds that developing countries can do much more to tap into,” said Dilip Ratha, manager of the migration and remittances team at the WB's Development Prospects Group.
Nigeria is readying a diaspora bond issue to mobilise diaspora savings and boost financing for development.
Continued efforts are required to lower the cost of sending money through official channels, although inroads are being made. During the first quarter, the global average cost for sending money fell to 8.4 percent of the transaction value, compared with 9.1 percent a year earlier, the WB said.
"The cost of remittances in Bangladesh is one of the lowest in the world mainly because of the strategic use of mobile financial services and strategic partnership developed among banks, telecom companies and microfinance institutions," Atiur Rahman, governor of Bangladesh Bank, said at the launch of the report.
“As development experts debate the post-2015 agenda, they also need to turn their attention to reducing the high cost of migration, particularly exorbitant fees paid by low-skilled workers to recruitment agents to secure jobs overseas,” Ratha said.
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