World Economy

Remittance Payments Hit Record $466b in 2017

Remittance Payments Hit Record $466b in 2017
Remittance Payments Hit Record $466b in 2017

Payments from immigrants back to their home countries rebounded to reach a new record in 2017 but the costs of transferring funds also increased, the World Bank said Monday.

The stronger-than-expected recovery in remittances—payments that are key to supporting the economies of many poor countries—was driven by growth in Europe, Russia and the United States, the World Bank said in a report, AFP reported.

The bank estimates that officially recorded remittances to low- and middle-income countries reached $466 billion in 2017, an increase of 8.5% over $429 billion in 2016. They are expected to increase by about 4% this year.

Remittance inflows improved in all regions and the top remittance recipients were India with $69 billion, followed by China $64 billion, the Philippines $33 billion, Mexico $31 billion, Nigeria $22 billion, and Egypt $20 billion.

The global average cost of sending $200 was 7.1% in the first quarter of 2018, and sub-Saharan Africa remains the most expensive place to send money to, where the average cost is 9.4%.

“While remittances are growing, countries, institutions and development agencies must continue to chip away at high costs of remitting so that families receive more of the money,” said Dilip Ratha, lead author of the report.

The bank calls on countries to take steps to simplify the process to reduce the costs, including “introducing more efficient technology.” By region, Europe and Central Asia saw the biggest growth last year, jumping 21%, while Sub-Saharan Africa rose 11%.

East Asia and the Pacific saw the biggest inflows of $130 billion, as South Asia received $117 billion, followed by Latin America with $80 billion.

 Taxing Expat Remittances

Expatriates in Kuwait could soon be facing a new reality after the Persian Gulf Arab country’s Parliamentary Financial and Economic Affairs Committee approved a bill that would tax overseas remittances.

If the bill, up for debate in parliament, is eventually accepted by the cabinet, it would make Kuwait the first (Persian) Gulf Cooperation Council member to impose a remittance tax.

The (P)GCC is known for a heavy dependence on expatriates in many sectors of its economies and analysts warned that taxing remittances would force expats to find alternative methods of sending funds home, a concern mentioned by the Central Bank of Kuwait.

The report said the tax rate suggested by the PFEAC starts at 1% for remittances less than 99 Kuwaiti dinars ($330) and increases to 5% for remittances beyond 500 dinars ($1,660). Remittance outflow from Kuwait in 2016 totaled 4.6 billion dinars ($15.3 billion). Nearly 27% of that was sent to India, 18% to Egypt, 7% to Bangladesh and 3% to both Pakistan and the Philippines.

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