REMITTANCE flows are the second largest source behind foreign direct investment (FDI) of external funding for developing countries, according to a recent World Development Report.
The report for the period ending December 2003 said in 2001 worker’s remittance receipts of developing countries stood at US$72,3 billion, much higher than total official flows and private non-FDI flows.
It said remittances were also 42% of total FDI flows to developing countries.
Remittances to low income countries were larger as a share of gross domestic product and imports than were those to middle income countries.
The report said remittances were also more stable than private capital flows, which often move pro-cyclically, thus raising incomes during booms and depressing them during downturns.
“By contrast, remittances are less volatile – and may even rise – in response to economic cycles in the recipient country,” the report said. “They are expected to rise significantly in the long term, once sluggish labour markets in G7 economies recover and new procedures for scrutinising international travelers become routine.”
Zimbabwe is currently trying to also woo locals abroad to send their money back home to shore up the ailing economy.