Remittances hit global high in 2018, India top recipient: World Bank

World Tuesday 09/April/2019 11:35 AM
By: Times News Service
Remittances hit global high in 2018, India top recipient: World Bank

Washington: Remittances to low and middle income countries reached a record high in 2018, according to the World Bank.

The top remittance recipients by country were India with $79 billion, followed by China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion), and Egypt ($29 billion), the World Bank said.

In it's latest Migration and Development Brief, the bank estimates that "officially recorded annual remittance flows to low and middle-income countries" reached $529 billion in 2018, an increase of 9.6 percent over the previous record high of $483 billion in 2017.

It indicated that "global remittances, which include flows to high-income countries," reached $689 billion in 2018, up from $633 billion in 2017.

The bank added that "regionally, growth in remittance inflows ranged from almost seven percent in East Asia and the Pacific to 12 percent in South Asia"

"The overall increase was driven by a stronger economy and employment situation in the US and a rebound in outward flows from some GCC countries and the Russian Federation. Excluding China, remittances to low and middle income countries ($462 bn) were significantly larger than foreign direct investments flows in 2018 ($344 bn)," the report noted.

Remittances to South Asia grew 12 percent to $131 billion in 2018, outpacing the 6 percent growth in 2017, the report stated. Inflows rose by more than 14 percent in India.

In Pakistan, remittance growth was moderate at 7 percent due to significant declines in inflows from Saudi Arabia, its largest remittance source. In Bangladesh, remittances showed a brisk uptick in 2018 (15 percent).

According to the World Bank, remittances to the Middle East and North Africa grew nine percent to $62 billion in 2018, where the increase "was driven by Egypt's rapid remittance growth of around 17 percent.

"Beyond 2018, the growth of remittance to the region is expected to continue, albeit at a slower pace of around three percent in 2019 due to moderating growth in the Euro Area"

In 2019, remittance flows to low- and middle-income countries are expected to reach $550 billion and become their largest source of external financing.

The global average cost of sending $200 remained high, at around 7 percent in the first quarter of 2019, according to the World Bank’s Remittance Prices Worldwide database. Reducing remittance costs to 3 percent by 2030 is a global target under Sustainable Development Goal (SDG) 10.7. Remittance costs across many African corridors and small islands in the Pacific remain above 10 percent.

According to the report, banks were the most expensive remittance channels, charging an average fee of 11 percent in the first quarter of 2019. Post offices were the next most expensive, at over 7 percent. Remittance fees tend to include a premium where national post offices have an exclusive partnership with a money transfer operator. This premium was on average 1.5 percent worldwide and as high as 4 percent in some countries in the last quarter of 2018.

On ways to lower remittance costs, Dilip Ratha, lead author of the Brief and head of KNOMAD, said, “Remittances are on track to become the largest source of external financing in developing countries. The high costs of money transfers reduce the benefits of migration. Renegotiating exclusive partnerships and letting new players operate through national post offices, banks, and telecommunications companies will increase competition and lower remittance prices.”

The report noted that banks’ ongoing de-risking practices, which have involved the closure of the bank accounts of some remittance service providers, are driving up remittance costs. Additionally, the report stated that progress had been made towards the Sustainable Development Goal target of reducing the recruitment costs paid by migrant workers.

Michal Rutkowski, Senior Director of the Social Protection and Jobs Global Practice at the World Bank, said, "Millions of low-skilled migrant workers are vulnerable to recruitment malpractices, including exorbitant recruitment costs. We need to boost efforts to create jobs in developing countries and to monitor and reduce recruitment costs paid by these workers."