Why are remittances important and given so much weight? What is it about them, that makes them important for a country’s economy?
Hello my name is Faisal Khan. I’m a banking and a payment consultant. A question after “What is a remittances” (What are remittances), why are remittances so important?
Remittances are extremely important for the developing countries, the emerging markets, the top ten receiving countries like India, Nigeria, Pakistan, Bangladesh, Philippines, Egypt, Kenya, Ghana, Sri Lanka, Nepal, etc. They all rely on remittances. The reason they rely on remittances is because their citizens that are now diaspora working in other countries are sending money back home. Now if a person or two sends money back home as foreign exchange that’s it’s okay but when tens and tens of thousands hundreds of thousands of them send money back home it mushrooms up to a lot of foreign exchange and foreign exchange is badly needed in developing countries to counter what is called the current account deficit. You import stuff and you export stuff but if you export less than when you import you need dollars. You can’t just print your currency and your dollars you need to buy those dollars from somewhere. And how do you do that? Well, you need to export more and do some do something else or borrow. The best way is to make up for that deficit is when remittances come in because they bring foreign exchange into the country and the very much needed foreign exchange counters the current account deficit. This is why countries like Pakistan, India, Bangladesh, a lot of the CAS countries and all of these sub-Saharan African countries, a lot of countries in Far East Asia are dependent on remittances. So remittances are extremely extremely important and vital to the economies of these developing countries.
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