WASHINGTON: Remittances into Pakistan grew by 26 percent during the year 2021 a compared to the overall growth of 8 percent in remittances in South Asia, according to estimates from the World Bank.
“Pakistan had another year of record remittances with growth at 26 percent and levels reaching $33 billion in 2021,” says the report released by World Bank’s Migration and Development Brief. In addition to the common drivers, the government’s ‘Pakistan Remittance Initiative’ to support transmission through formal channels attracted large inflows.
According to the report, overall remittances to South Asia likely grew around 8 percent to $159 billion in 2021. Higher oil prices aided economic recovery and drove the spike in remittances from the Gulf Cooperation Council (GCC) countries which employ over half of South Asia’s migrants. Economic recovery and stimulus programs in the United States also contributed to the growth.
In India, remittances advanced by an estimated 4.6 percent in 2021 to reach $87 billion, according to the report. Remittances are the dominant source of foreign exchange for the region with receipts more than twice as large as FDI in 2021.
On remittance costs, the report said South Asia has the lowest average costs of any world region at 4.6 percent but sending money through official channels is expensive compared with informal channels which remain popular. Cost-reducing policies would create a win-win situation welcomed by migrants and South Asian governments alike.
The report says remittances to low- and middle-income countries are projected to have grown a strong 7.3 percent to reach $589 billion in 2021. This return to growth is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7 percent despite a severe global recession due to COVID-19.
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For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).
“Remittance flows from migrants have greatly complemented government cash transfer programs to support families suffering economic hardships during the COVID-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic,” said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.
Remittances registered strong growth in most regions. Flows increased by 21.6 percent in Latin America and the Caribbean, 9.7 percent in Middle East and North Africa, 8 percent in South Asia, 6.2 percent in Sub-Saharan Africa, and 5.3 percent in Europe and Central Asia.
In East Asia and the Pacific, remittances fell by 4 percent – though, excluding China, remittances registered a gain of 1.4 percent in the region. In Latin America and the Caribbean, growth was exceptionally strong due to economic recovery in the United States and additional factors, including migrants’ response to natural disasters in their countries of origin and remittances sent from home countries to migrants in transit.
The cost of sending $200 across international borders continued to be too high, averaging 6.4 percent of the amount transferred in the first quarter of 2021, according to the World Bank’s Remittance Prices Worldwide Database.
This is more than double the Sustainable Development Goal target of 3 percent by 2030. It is most expensive to send money to Sub-Saharan Africa (8 percent) and lowest in South Asia (4.6 percent). Data reveal that costs tend to be higher when remittances are sent through banks than through digital channels or through money transmitters offering cash-to-cash services.
Remittances are projected to continue to grow by 2.6 percent in 2022 in line with global macroeconomic forecasts. A resurgence of COVID-19 cases and reimposition of mobility restrictions poses the biggest downside risk to the outlook for global growth, employment and remittance flows to developing countries. The rollback of fiscal stimulus and employment-support programs, as economies recover, may also dampen remittance flows, it adds.
