
Some countries are so poor that they would economically collapse if it weren’t for many of their citizens migrating overseas to work in richer countries, and then sending some of that money back to their home countries. The landlocked nation of Lesotho sends many of its people to work in the wealthier country of South Africa. Pakistan sends millions of people to work in wealthier countries in the Persian Gulf or Europe. And war-torn Yemen sends millions of people to work in Saudi Arabia and other wealthy Arab states. They send back to Yemen money equal to 20% of Yemen’s economy. The money they send back enables millions of Yemen’s people to avoid starvation even though Yemen’s decade-long civil war has wiped out many jobs and destroyed much of Yemen’s transportation network, and Yemen is backward and largely arid.
Many countries have weathered civil wars economically through remittances, such as Tajikistan, Lebanon, and Liberia. Such remittances prevented the populations of Liberia and Tajikistan from starving, and today, remittances are the mainstay of the Tajik economy — 45% of its GDP, far more important than things like manufacturing or agriculture. A quarter of Tajikistan’s population works in Russia, which is much wealthier.
Such remittances are economically more important to poor countries than even foreign aid or foreign investment, reports the World Bank:
Officially recorded remittances to low- and middle-income countries (LMICs) are expected to reach $685 billion in 2024. The true size of remittances, including flows through informal channels, is also believed to be even larger. The growth rate of remittances in 2024 is estimated to be 5.8 percent, significantly higher than 1.2 percent registered in 2023…
The top five recipient countries for remittances in 2024 are India, with an estimated inflow of $129 billion, followed by Mexico ($68 billion), China ($48 billion), the Philippines ($40 billion), and Pakistan ($33 billion). In smaller economies, remittance inflows represent very large shares of gross domestic product (GDP), highlighting the importance of remittances for funding the current account and fiscal shortfalls. Topping the list is Tajikistan (45 percent of GDP), followed by Tonga (38 percent), Nicaragua (27 percent), Lebanon (27 percent), and Samoa (26 percent)….
By region, remittance flows to South Asia is expected to register the highest increase in 2024, at 11.8 percent, driven mainly by continued strong flows to India, Pakistan, and Bangladesh….remittance growth to Latin America and the Caribbean is projected to slow to 5.5 percent in 2024, from 7.5 percent a year ago. Remittances to Mexico is expected to reach about $68 billion in 2024, an increase of 3 percent. Mexico…is the world’s second-largest recipient of remittances….It is notable that remittances have continued to outpace other types of external financial flows to low- and middle-income countries. Remittances have even surpassed FDI significantly. The gap between remittances and FDI is expected to widen further in 2024.