Highlights:

The growth of remittances to low- and middle-income countries (LMICs) slowed to 3.8 percent in 2023 after averaging about 9 percent over the previous two years. The $669 billion in remittances to LMICs exceeds the forecast given in Migration and Development Brief 38 (published in June 2023), supported by the continued strength of job markets in the countries of the Organisation for Economic Co-operation and Development (OECD) and the Gulf Cooperation Council.

The growth of remittances in 2023 was particularly high in Latin America and the Caribbean (8 percent) because of a historically low rate of employment in the United States, and in South Asia (7.2 percent), largely due to a continued increase in remittances to India. Remittances’ growth in 2023 was more moderate in East Asia and the Pacific (3.0 percent), although excluding China growth was 7 percent, and in Sub-Saharan Africa (1.9 percent), the same rate of increase as Nigeria, the region’s largest recipient of remittances.

Remittances have become the premier source of finance for LMICs, exceeding the more volatile foreign direct investment flows in 2023 by more than $250 billion. The growing importance of remittances has spurred efforts to improve the timeliness and consistency of data on remittances flows, the main goal of the International Working Group on Improving Data on Remittances (RemitStat).

The cost of sending remittances to developing regions remained high in the second quarter of 2023, at 6.2 percent—more than twice the Sustainable Development Goal target of 3 percent by 2030. Average costs remained the highest in Sub-Saharan Africa (7.9 percent) and the lowest in South Asia (4.3 percent).

This brief’s special section describes how diaspora finances can be mobilized for development and strengthening a country’s debt position.

Future inflows of remittances can be used as collateral to lower the costs of international borrowing for national  banks in developing countries. Remittances also can play an important role in improving a country’s ability to repay debt, due to their large size relative to other sources of foreign exchange, countercyclical nature, and indirect contribution to public finances (e.g., by increasing revenues from consumption taxes, as well as seigniorage revenues as remittances are deposited in the banking system). The contribution of remittances to debt sustainability in low-income countries was recognized in the 2017 revision to the International Monetary Fund/World Bank debt sustainability analysis framework.