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Workers’ Remittances An Important and Stable Source of Development Finance Dilip Ratha International Conference on Migrant Remittances London October 9 th , 2003. Outline. Rising importance of workers’ remittances Pros and Cons Policy issues.

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    1. Workers’ Remittances An Important and Stable Sourceof Development FinanceDilip RathaInternational Conference on Migrant RemittancesLondonOctober 9th, 2003

    2. Outline Rising importance of workers’ remittances Pros and Cons Policy issues

    3. Remittances have become a key source of global development finance $ billion2002 FDI flows 135 Private debt flows -4 Official finance 35 Workers’ remittances 88

    4. Main providers of remittances Outward workers’ remittance payments To all countries, $ billion United States Saudi Arabia 1987 1992 1972 1977 1982 1997 2002

    5. Main providers of remittances Outward workers’ remittance payments To all countries, $ billion United States Saudi Arabia 1987 1992 1972 1977 1982 1997 2002 Remittances rise with migration and income

    6. Migration will increase in the long-term • Income gap between source and destination countries is wide • Dependency ratios and pension costs are rising in industrial countries • Temporary, and South-South, migration to increase

    7. Pros:Remittances are stable Capital flows to developing countries $ billion

    8. And more evenly distributed:Although top recipients are large countries…. $ billion, 2002

    9. Smaller countries receive more remittances as a share of GDP Remittances as % of GDP, 2002

    10. Cons: Remittances may…

    11. Cons: Remittances may… • …finance “unproductive” spending

    12. Cons: Remittances may… • …finance “unproductive” spending • …promote idleness among recipients

    13. Cons: Remittances may… • …finance “unproductive” spending • …promote idleness among recipients • …raise inequality in the middle-income range

    14. Cons: Remittances may… • …finance “unproductive” spending • …promote idleness among recipients • …raise inequality in the middle-income range • …lead to currency appreciation and Dutch disease

    15. Policy issues

    16. Policy issues • Recognize that remittances are person-to-person flows

    17. Policy issues • Recognize that remittances are person-to-person flows • Improve data reporting

    18. Policy issues • Recognize that remittances are person-to-person flows • Improve data reporting • Encourage flows through formal sector

    19. Remittance costs are high and regressive Charge

    20. Improve migrants’ access to banks

    21. Improve migrants’ access to banks

    22. Strengthen financial infrastructure

    23. Strengthen financial infrastructure • Clearing house arrangement

    24. Strengthen financial infrastructure • Clearing house arrangement • Improve transfers to rural areas – tie up with POSBs

    25. Strengthen financial infrastructure • Clearing house arrangement • Improve transfers to rural areas – tie up with POSBs • Increase transparency and competition

    26. Strengthen financial infrastructure • Clearing house arrangement • Improve transfers to rural areas – tie up with POSBs • Increase transparency and competition • International cooperation may be needed

    27. Improve investment climate in recipient countries Remittances as % of GDP, 1996-2000 High Low Corruption 0.5 1.9 Inequality 0.9 1.5 M2/GDP 1.2 0.9 Trade/GDP 1.2 1.0

    28. Summary • Remittances have become an important – and stable - source of global development finance • Increasing remittances would require strengthening the financial infrastructure and improving the investment climate