Foreign aid is nothing compared to the kindness of family. Every year, the biggest transfer of funds from the rich world to developing countries comes in the form of remittances—transfers from foreign workers back to friends and relatives in their home country.
In 2016, the World Bank estimates that $575 billion in remittances were sent globally. The $429 billion in remittance payments received by developing countries last year was triple the amount of foreign aid disbursed by rich countries.
It’s worrying, then, that it looks like remittances are on the decline. For the first time in three decades, annual global remittances have fallen for two years in a row—these transfers were $22 billion less last year than they were in 2014.
The downturn is probably a blip. The World Bank expects remittances to rise in the coming years, as the global economy improves. They estimate payments will reach a record $615 billion in 2018, with $460 billion going to developing countries.
The primary culprits for the recent drop are low oil prices and slow economic growth in the Gulf states and Russia—the sources of almost 20% of all remittances. Most of the foreign workers in these countries are from South and Central Asia, the regions hit hardest by the remittance slowdown.
India, the world’s largest remittance recipient, took in $8 billion less in 2016 than in 2014. The amount of the remittances sent to India from the UAE and Saudi Arabia are two of the 10 largest outflows from one country to another.
For many Indian families that rely on these funds, the decrease in remittances could be calamitous. For the Indian economy as a whole, the impact was not large—a decline worth less than one half a percent of GDP.
By contrast, Tajikistan was devastated. Remittances to Tajikistan, which are worth almost half the country’s GDP in some years, dropped precipitously, $4.2 billion in 2013 to $1.8 billion in 2016. The World Bank’s prognosis for a remittance rebound is good news for countries like Tajikistan, where people rely heavily on the largesse of foreign workers.