If you wonder how remittances affect developing economies, the short answer is that they act as a major external lifeline. In 2023 they reached an estimated $656 billion in low- and middle-income countries, topping foreign direct investment and aid.
This guide is part of the site’s wider coverage of global development, and it looks at how money sent home by migrants fits into the bigger picture.
| Item | Value |
|---|---|
| Officially recorded remittances to low- and middle-income countries, 2023 | $656 billion (estimate) |
| Growth in those flows, 2023 | 0.7% |
| Projected growth, 2024 | 2.3% |
| Global average cost of sending $200, fourth quarter of 2023 | 6.4% of the amount sent |
| SDG target for that cost | 3% |
| Tonga: remittances as a share of GDP | 41% |
These figures come from the World Bank’s June 26, 2024 press release on its Migration and Development Brief. They are estimates and projections that can change, so check the source before you rely on them.
What remittances do for recipient economies
Remittances are the money that migrants send to families and communities back home. According to the World Bank’s June 2024 release, officially recorded flows to low- and middle-income countries (LMICs) moderated in 2023 after a period of strong growth during 2021-2022.
The slowdown was modest, at 0.7%, yet the World Bank still described remittances as a crucial source of external finance for developing countries. In 2023 they surpassed both foreign direct investment (FDI) and official development assistance (ODA).
For governments, the main benefit shows up in the current account, the broad measure of a country’s trade and income with the rest of the world. The release says remittances bolstered the current accounts of several countries grappling with food insecurity and debt issues.
Iffath Sharif of the World Bank put the case in strong terms: “Migration and resulting remittances are essential drivers of economic and human development.” That is the Bank’s own view, and it sits alongside the practical points below about cost, dependence and risk.
Where the money goes: a regional picture
Remittance trends in 2023 varied sharply by region, according to the World Bank’s regional breakdown. Here is how the six regions looked:
- Latin America and the Caribbean: growth slowed to 7.7%, reaching $156 billion.
- South Asia: up 5.2% to $186 billion.
- East Asia and Pacific (excluding China): up 4.8% to $85 billion.
- Sub-Saharan Africa: down 0.3% to $54 billion.
- Europe and Central Asia: down 10.3% to $71 billion.
- Middle East and North Africa: down 15% to $55 billion.
Country results sat behind those averages. Mexico received $66.2 billion, a 7.8% increase, and stayed the top recipient in Latin America and the Caribbean, while India’s flows rose 7.5% to $120 billion and drove South Asia’s growth. The release links both gains to strong labor markets in host economies such as the United States and Europe.
Why do some countries depend on remittances so heavily?
Dependence is usually measured as remittances as a share of GDP. By that yardstick, the World Bank reports that Tonga was the most dependent country globally in 2023, at 41%. Remittances are also crucial for Pacific Island economies such as Palau, Samoa, Tonga and Vanuatu.
In Sub-Saharan Africa, the release names the Gambia, Lesotho, Comoros, Liberia and Cabo Verde as heavily dependent. Money from abroad helped several African countries cope with food insecurity, drought, supply chain disruptions, floods and debt-servicing difficulties.
Heavy dependence cuts both ways, because a shock in the host country can travel straight home. The fall in Europe and Central Asia was driven by reduced transfers from Russia to many Central Asian countries.
Exchange rates can also redirect flows. In Egypt, a gap between official and parallel rates likely pushed remittances into unofficial channels, and official flows are reported to have rebounded once the rates were unified in March 2024.
The cost of sending money home
Fees take a bite out of every transfer. In the fourth quarter of 2023, the global average cost of sending $200 was 6.4% of the amount sent, up slightly from 6.2% a year earlier and well above the SDG target of 3%.
Technology helps. Digital remittances cost 5% on average, compared with 7% for non-digital methods.
Costs differ widely by destination:
- Sending $200 to Sub-Saharan Africa cost an average of 7.9%, almost unchanged from a year before.
- Sending $200 to East Asia and Pacific averaged 5.8% in late 2023.
- In East Asia and Pacific, the most expensive corridor cost as much as 17.1%.
Cheaper, formal channels matter beyond the fee itself. Dilip Ratha, the report’s lead author, argued that leveraging remittances for financial inclusion and capital market access can enhance recipient countries’ development prospects, a theme that overlaps with the debate over microfinance pros and cons.
Risks, data gaps and what to watch
The World Bank projects that remittances to LMICs will grow faster, by 2.3%, in 2024, though unevenly across regions. It lists the downside risks as weaker than expected growth in high-income migrant-hosting countries, plus volatility in oil prices and currency exchange rates.
The numbers themselves are also imperfect. The release says statistical data remain inconsistent and incomplete, and that the gap between inward and outward flows has widened, with informal channels a major factor, such as migrants carrying cash by hand when they return home.
As of that June 2024 release, the International Working Group to Improve Data on Remittance Flows (RemitStat) planned a report later in the year with recommendations for better data. Readers should treat any single year’s total as an estimate of recorded flows, not of every dollar sent.
Most recipient economies in this story belong to what is often called the Global South, and the explainer on global south meaning gives background on that term.
Frequently asked questions
Do remittances really exceed foreign investment and aid?
Show answer
According to the World Bank’s June 2024 release, remittances to low- and middle-income countries surpassed both foreign direct investment and official development assistance in 2023. That comparison covers officially recorded flows only.
How much does it cost to send money home?
Show answer
In the fourth quarter of 2023, the global average cost of sending $200 was 6.4%, against an SDG target of 3%. Digital transfers averaged 5%, while non-digital methods averaged 7%.
Which regions saw remittances grow most in 2023?
Show answer
Latin America and the Caribbean grew most, at 7.7%, followed by South Asia at 5.2% and East Asia and Pacific at 4.8%, excluding China. Europe and Central Asia fell 10.3%, and the Middle East and North Africa fell 15%.
Why are remittance statistics incomplete?
Show answer
Some money moves through informal channels, such as migrants carrying cash by hand when they return home. The World Bank says this is a major factor in the widening gap between inward and outward flow data.
