A United Nations report has found that remittances locally known as kyeyo money, have been critical in spurring economic growth in least developed countries (LDCs), even in the difficult times of the global financial crisis.
The report, by United Nations Conference on Trade and Development (UNCTAD), shows that whereas foreign aid has been declining over the years, remittances have remained stable and have greatly contributed to growth in LDCs. For instance emigrant remittances to Africa grew steadily from $3.5bn in 1990 to $27bn in 2011.
The report, 'Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities,' recommends that remittances should be mobilized for expansion and diversification of productive capacities.
However, the report recommends that for remittances to be helpful to developing nations, costs of transferring this money should be lowered. The researchers believe that remittances to sub-Saharan Africa in 2010 would have generated an additional $6bn for the recipients if the costs of sending the money had matched the global average. Transfer fees run as high as 12% of the amount transferred in some countries.
However, stable remittances are coming at a cost:
"The brain drain statistics for the world's 48 least developed countries are stark: among people from LDCs with a university-level education, about one in five, leaves for employment overseas, compared with one in 25 in case of developed countries," the report states.
Globally, the number of people who migrated from LDCs increased from 19 million in 2000 to 27 million in 2010.
"80% of LDC emigrants migrate within the South, mostly to South Asia, the middle East and Africa."
The majority of Ugandans on kyeyo are in Kenya, the report notes, with those remitting money estimated at over 500,000 people. Of these, 70,000 are in Asia, with 50,000 in Europe, especially Britain.
However, while launching the report, Alex Warren Rodriguez, a senior Economist at UNDP Uganda country office, cautioned least developed countries to prepare for the possibility of a lengthy period of stagnation and deflation and to deal with a crisis that originates elsewhere.
The report was released on Monday globally, while in Uganda it was launched yesterday at the Economic Policy Research Centre, Makerere University.