REUTERS/Henry Romero
People walk past a foreign-exchange building and a money-transfer business, December 9, 2016.
For the first time in 30 years, remittances to developing nations from rich ones fell for a second straight year in 2016, a trend that is depriving poor countries of a key source of income, according a new report from the World Bank.The World Bank estimates officially recorded remittances to the developing world amounted to $429 billion in 2016, down 2.4% from $440 billion in 2015. Global remittances, which include flows to high-income countries, contracted by 1.2% to $575 billion in 2016, from $582 billion in 2015.
"Low oil prices and weak economic growth in the Gulf Cooperation Council countries and the Russian Federation are taking a toll on remittance flows to South Asia and Central Asia, while weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa," the report said.
The decline in remittances, when valued in U.S. dollars, was made worse by a weaker euro, British pound and Russian ruble against the US dollar, the World Bank said. Many large countries with substantial remittances saw cutbacks. India led the decline with remittances dropping 8.9% to $62.7 billion last year, though it remained the world's top recipient.
"Remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition," said Rita Ramalho, Acting Director of the World Bank's Global Indicators Group.
The problem of rising migration raises new concerns about remittances since rich countries, including the United States under Donald Trump, have threatened to tax them. Trump says this is one way get Mexico to pay for his proposed border wall.
"Several high-income countries that are host to many migrants are considering taxation of outward remittances, in part to raise revenue, and in part to discourage undocumented migrants. However, taxes on remittances are difficult to administer and likely to drive the flows underground," the World Bank said.
Still, forecasts for stronger economic growth should bolster remittances again this year, the World Bank added.
"In keeping with an improved global economic outlook, remittances to developing countries are expected to recover this year, growing by an estimated 3.3 percent to $444 billion in 2017."