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Migrants’ Transfers and the Balance of Payments
11th February 2011
Transfers of money across national boundaries by migrant workers appears in both the current and capital account of the balance of payments.
For the world as a whole in 2010:
Stock of immigrants: 215.8 million or 3.2 percent of population
Females as percentage of immigrants: 48.4 percent
Refugees: 16.3 million or 7.6 percent of the total immigrants
Top 10 remittance recipients in 2010 (billions): India ($55.0 bn), China ($51.0 bn), Mexico ($22.6 bn), Philippines ($21.3 bn), France ($15.9 bn), Germany ($11.6 bn), Bangladesh ($11.1 bn), Belgium ($10.4 bn), Spain ($10.2 bn), Nigeria ($10.0 bn)
Top 10 remittance recipients in 2009 (percentage of GDP): Tajikistan (35.1 percent), Tonga (27.7 percent), Lesotho (24.8 percent), Moldova (23.1 percent), Nepal (22.9 percent), Lebanon (22.4 percent), Samoa (22.3 percent), Honduras (19.3 percent), Guyana (17.3 percent), El Salvador (15.7 percent)
(source: World Bank)
International transfers of money by private individuals such as workers’ remittances appears in the current account of the balance of payments. For example a portion of a migrant worker’s monthly wage that might be sent back to their family living in another country.
Migrants’ capital transfers are not transactions between two parties (for example the migrant worker and his/her family) but other transfers of money that can arise from the migration of individuals from one economy to another, for example money that accumulates in bank accounts or returns from portfolio investments (perhaps the profit from the sale of a property) that is sent remitted home.
Internationally, after inward foreign direct investment, migrants’ capital transfers are now the second largest source of capital inflows to emerging markets and developing countries and they provide an increasingly important means of helping to fund the current account deficits of economies with balance of payments problems.
Balance of payments data on remittances very likely underestimates the true amount of worker remittances from one country to another be it those that appear on the current account and those that find their way into the capital account.
For more background on this - try this resource from the World Bank
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.