Rome – 4 March 2011 - Migrant workers around the world started out 2011 by sending home significantly more money than they did in 2010, according to the International Fund for Agricultural Development (IFAD).
The Fund said today that initial reports for January from ten central banks in key home countries for the world’s migrants show remittances have increased over January 2010 in all but one country, Brazil, where the decrease was three per cent. Pakistan showed a 34 per cent increase over last year, Armenia and Georgia showed increases of 23 and 17 per cent respectively, and Guatemala, Honduras, El Salvador and Mexico showed increases of between six and 15 per cent. Bangladesh reported a two per cent increase.
IFAD said part of the reason for remittance increases in Central American countries was due to significant decreases that occurred last year. The agency said that current growth in that region will likely keep pace through the first quarter, and then moderate for the remainder of the year.
Meanwhile, much rides on the rate of recovery in the United States, the largest remitting economy. While short-term migrant laborers tend to be the first to lose their jobs during an economic downturn, they are often the first to be rehired during a recovery, so there is hope for continued improvement in global remittances as the U.S. economy continues to emerge from the crisis.
Each year, migrant workers send a total of more than US$ 330 billion to their home communities, an amount that is critical to lifting millions out of poverty across a wide range of developing countries. When used to their maximum potential, these funds can also drive economic growth in the countries and communities that receive them. In many developing countries remittances surpass foreign direct investment and official development assistance combined.
But while welcoming the present trend toward higher remittance amounts, IFAD noted that often the figures miss the underlying reality of recipient families in developing countries.
Since the outbreak of the financial crisis, exchange rates have been highly volatile. Of the countries for which IFAD tracks remittances information, the ten most volatile countries all exhibited swings of 30 per cent or more between October of 2008 and March of 2011. Accordingly, over the course of 2010, while 70 per cent of countries indicated an increase in the number of dollars remitted, recipients in 60 per cent of countries experienced an actual decrease in the purchasing power of the money they received.
The rise of the dollar against developing country currencies at the outset of the global recession initially had a positive effect for families receiving remittances, effectively delaying the effect of the crisis in those countries with a flexible exchange rate. In 2010, however, that trend began reversing as developing country currencies have rebounded, leaving many recipient families to face the same financial pressures that have been experienced by migrant workers in more developed economies.
South America in particular has been negatively impacted by currency appreciation. For example, while only suffering a 6.7 per cent decline in remittances last year, the appreciation of the Brazilian Real resulted in an 18 per cent decline in remittances in terms of its local currency value. When adjusted for inflation, purchasing power of remittance recipients declined 23 per cent. This issue also manifested itself similarly in the region’s second largest economy, Colombia, where purchasing power declined just under 18 per cent.
IFAD monitors trends in remittances in support of its Financing Facility for Remittances (FFR), a multi-donor facility it has administered since 2006, with the goal of increasing the development impact of remittances and particularly the ability of poor rural households to further benefit from remittances in their efforts to overcome poverty.
Press release No.: IFAD/18/2011
The International Fund for Agricultural Development (IFAD) works with poor rural people to enable them to grow and sell more food, increase their incomes and determine the direction of their own lives. Since 1978, IFAD has invested over US$12.5 billion in grants and low-interest loans to developing countries, empowering more than 370 million people to break out of poverty. IFAD is an international financial institution and a specialized UN agency based in Rome – the UN’s food and agricultural hub. It is a unique partnership of 167 members from the Organization of the Petroleum Exporting Countries (OPEC), other developing countries and the Organisation for Economic Co-operation and Development (OECD).