The Role And Economic Impact Of Remittances

Large-scale outward migration is one of the symptoms of slow progress in development and low expectations of employment and higher living standards at home. Nevertheless, for many developing countries, remittances of migrants working abroad have become an important source of foreign exchange. They are private income and a means to improve the living conditions of many poor households in the receiving countries. While the ultimate policy objective must be to remedy the root causes of the migration through output and productivity growth and job creation in the home countries, remittances are to some extent a potential contribution to the external financing needs of the migrants' home countries. A challenge for policymakers is to use this potential within the framework of a broader development strategy and channel the remittances, as far as possible, to productive uses. Developed countries can support efforts to maximize the developmental impact of migrants' remittances by reducing the cost of remittance transfers and making the transfer channels more efficient. Home and host countries could also cooperate to create incentives for talented migrants to return home after several years of work abroad so as to strengthen the local human resource base, by using the experience and skills acquired abroad. Indeed, managing international labour mobility, especially between the developed and the more advanced developing countries, on the one hand, and the poorer countries or economies with large amounts of excess labour, on the other, could constitute a key element of the global partnership for development.