Remittances Are Important But Distort the Economy

    26 June, 2014


    From VOA Learning English, this is the Economics Report.

    Many immigrants send small amounts of money - called "remittances" - home to friends and family. But those small amounts of money together add up to a lot, consider that there are about 200 million international migrants.

    In 2013, migrants around the world sent $400 billion back to their home countries, that is much more than official aid to many countries. For some nations, it is the biggest provider of foreign exchange.

    Jean Claude Kazadi and his wife Myriam came to the United States from the Democratic Republic of Congo. They quickly began sending money home after they arrived. They wanted to help family members left behind.

    Remittances Are Important But Distort the Economy

    "We believe in supporting each other. We believe in supporting our parents, specifically, and we believe in supporting our brothers and sisters," Kazadi said.

    Jean Claude Kazadi is a doctor who works on HIV Aids for Catholic Relief Services in Maryland. He often visits the Democratic Republic of Congo, and he hopes he is helping Africans with his work. But he knows the $400 he sends to his parents every month is important.

    Economist Adolfo Barajas of the International Monetary Fund(IMF) has studied remittances for ten years. He has seen their effects on economies.

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

    Mr. Barajas says a huge migration has driven this flow of money to countries around the world. But he says there are problems with governments receiving large amounts of money. They may use the money less effectively.

    Economists have said that remittances help families who receive them by increasing their income. But there is a concern that the income into a national economy will cause its money to increase in value. In turn, a country's exports can become more costly and less competitively.

    However, economists agree that remittances affect the receiving country's economy in good ways. Dilip Ratha is a remittance expert with the World Bank. He says remittances help improve people's lives.

    "They provide incomes, they provide a lifeline for people, they reduce poverty, they provide funding for business investment, human capital investments, education, health," Ratha said.
    Economists say that private investors leave when contries are in conflict. But Dilip Ratha says remitters like the Kazadis of the Democratic Republic of Congo continue to send assistance.

    "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 is a simple case of showing their parents that they have not forgotten them.

    And that is the Economics Report from VOA Learning English. I'm Mario Ritter.