Voice of America (Washington, DC)

10 June 2014

Africa: Remittances High On Radar of World Economists

Many migrants send small amounts of money - called "remittances" - home to friends and family members. But with 200 million international migrants out there, those small sums add up quickly.

In 2013, migrants around the world sent back $400 billion, far outweighing official aid to many countries and sometimes providing the largest source of foreign exchange. This has economists wondering - can remittances boost not just a receiving family's budget but that country's economy too?

When Jean Claude Kazadi and his wife Myriam came to the U.S. from the Democratic Republic of Congo they immediately began sending money home. They wanted to help family members left behind.

"That is the way we grew up. We believe in supporting each other. We believe in supporting our parents, specifically, and we believe in supporting our brothers and sisters."

Jean Claude is a doctor who works on HIV Aids for Catholic Relief Services in Maryland. He frequently visits Congo, and says he hopes he is helping his fellow Africans through his work. But he knows that the $400 a month he sends home to his parents are a lifeline.

"If we don't do something, do you think the government will actually do something to support my parents? They will not. They don't care about it."

Economist Adolfo Barajas of the International Monetary Fund (IMF) has been studying remittance trends for a decade, watching how they affect receiving economies.

"They have been growing tremendously from 1990 to 2010; they grew more than sevenfold," says he.

Barajas says massive migration drives the trend, but notes a possible downside - that governments may be less efficient if they are receiving large windfalls of cash.

Economists have long said that remittances generally strengthen the families who receive them, by boosting their income. But some are concerned that all this cash can cause a nation's currency to appreciate, bidding up prices and making that country less competitive when it comes to, for example, exporting goods.

But economists, including Barajas, agree remittances affect a receiving country's economy in many positive ways. Dilip Ratha, is a remittance expert with the World Bank.

"They provide incomes, they are a lifeline for people, they reduce poverty, they provide funding for business investment, human capital investments, education, health," says Ratha.

Economists say that when countries are in conflict, like Jean Claude and Myriam's Democratic Republic of Congo, private investors tend to sneak out, while remitters rush in.

"Because that is precisely when the needs of the families left behind increase. And to meet those needs, migrants send money home," says Ratha.

For Myriam and Jean Claude Kazadi, it's about showing their parents they have not forgotten them, even though they live so far away.

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