NEW YORK: Banks and aid agencies have been warning of a pandemic-related plunge in the amount of money sent by migrants to family back home who rely on the income. In a typical year, more than 270 million migrants living and working abroad send these cash transfers, known as remittances, to their home countries.
Yet so far, despite the lockdowns that have devastated wealthier economies and caused massive unemployment, remittances have generally held up this year. In some cases they’ve even been higher than usual, based on our review of the latest available data and press releases for top remittance recipient countries. Remittances to Mexico, for example, surged 9.4% in the first eight months of the year. Pakistan is also experiencing a record increase, while cash transfers to such countries as Vietnam and the Philippines have held steady.
There a few likely reasons for the positive news for these and other countries – but there’s also reason to worry.
The importance of remittances
Remittances normally flow from rich countries like the U.S., the United Arab Emirates and Germany to lower- and middle-income countries.
In 2019, migrants sent a record US$554 billion home. This is more than the sum of all investments made by foreign companies in such developing countries and over triple the amount of aid governments provide.
Remittances are also more dependable than either international aid or investment. During bad times, remittances tend to increase, while foreign investments usually fall. And beyond directly supporting the intended recipient, they are essential for helping poorer nations fight poverty and improve health care and education.
Our research with Michael Clemens on Filipino workers in South Korea, for example, found that overseas work increased investment in their children’s education and health care by several hundred percent. In such South Asian countries as Nepal, Pakistan and Bangladesh, remittances