Remittances from Ugandans working abroad, locally called kyeyo, have grown by about 14% annually in the past 10 years, according to a new report by the UN Conference on Trade and Development (UNCTAD).
According to the Least Developed Countries (LDCs) Report 2012, Uganda's percentage growth in remittances surpassed that of most countries like Mauritania, Comoros, Yemen, Malawi, and Angola.
Uganda also performed better than Liberia, Zambia, Lesotho, Burkina Faso, and Tanzania, among other countries.
Launched at the Economic Policy Research Centre (EPRC) in Makerere on Wednesday, the report revealed that Uganda is the main source of Rwanda's remittances.
Bank of Uganda estimates show that from 2000 to 2007, remittances averaged $341.2m (about sh893b) per annum, almost equivalent to foreign direct investments that averaged $345.5m (about sh904b) during the same period.
Despite the recent global economic slump, kyeyo money has increased from $694m (sh1.56 trillion) in 2008 to about $773m (sh1.9 trillion) in 2009 and almost sh3trillion in 2010.
The UNCTAD report shows that remittances accounted for about 6% of Uganda's Gross Domestic Product (GDP) between 2008 and 2010. The percentage has since increased to 25%.
According to the report, almost half of the international remitting emigrants are high-skilled, accounting for two-thirds of total remittance flows to the country.
With 100% annual growth in remittances, Burundi leads the list, followed by Sierraleon and Guinea.
Burundi gets most of its remittances from Tanzania ($8m in 2010) and Uganda ($5m) followed by Belgium ($3m).
Rwandans living in Uganda send about $25m back home every year, making Uganda the main source of Rwanda's remittances.
On the other hand, Uganda gets most of its remittances inflows from Kenya ($326m), United Kingdom ($176m) and US ($87.4m). The three countries provide 76% of Uganda's total earnings from remittances, according to the report.
The report shows that the share of international remittance income spent on health and education in Uganda ranged between 10 to 32 per cent.
"Accordingly, remittances are typically found to improve health and education outcomes, even though the absence of a migrant family member may to some extent erode part of these benefits."
In the last decade, remittances have been central to the economy, having surpassed coffee, which only fetched $348m in 2008, as a foreign exchange earner.
The UNCTAD report also shows that remittances have surpassed foreign direct investments (FDI) in Uganda.
However, discussing the report at EPRC yesterday, economists expressed mixed feelings about the high rate of brain drain in the country, albeit with increased remittances.
They also decried the 'high and prohibitive' cost of formal remitting in LDCs which is close to 12% of the total amount being remitted compared to the global average of 9%.
For remitters sending from the UK to Uganda, the average cost is lower than from Tanzania, at 8% and 12% respectively. This has forced many remitters to send their money through informal avenues which experts say is detrimental to the economy.
UNDP's senior economist Alex Warren Rodriguez urged the Government to encourage the public to put the money from remittances to better use to spur the country's development.