Carping against remittances is brainless
July 16, 2009 | By Christopher | Filed Under Letters
It is distasteful to see people like Gerhard Ramsaroop and others writing against a financial source for development; and I am still trying to comprehend their reasoning behind their hypercritical writings. Gerhard Ramsaroop and others are comparing remittances with other financial sources for developing countries; instead, they should try and see remittances as a complementary financial source.
It is impossible to ignore the positives remittances offer to the development of poor nations like Guyana. The reality is that, developing countries depend on remittances as one financial source, especially for the benefit of their people, and also the spin offs from the multiplier effects are important.
We must note that remittances are not the only financial source for developing countries, since we also depend on other important sources, such as Foreign Direct Investment (FDI) and official development assistance. Remittances should be viewed as another branch on the tree of financial sources complementing the other financial branches with the objective to produce ripe financial fruits. The multiplier effect of remittances should be promoted and any negative spin on the positives of remittances is obtuse. Today, nitpickers are trying to contend that remittances only benefit pro-government people; I must say, this thinking has reached the peak of ignorance.
Remittances have been claimed as not being critical towards the development of Guyana. It is obvious that this flawed rationale for remittances, which are seen as competing with other financial avenues; instead, it must be seen as a complementing financial source working together with the other sources to achieve long-term growth and development for the country. Remittances are more stable than private capital flows and in the recipient country it is less affected by economic cycles.
When people spend remittances on basic needs, retail sales are boosted, which will lead to an increase in demand for more goods and services, which in turn will fuel output and unemployment. Remittances should be seen as a tool used to balance the inequalities caused by the decline in output experienced by developing countries, loss of trade opportunities and emigration.
These nitpickers who shun their light against remittances deliberately fail to acknowledge the positives of remittances to the developing world. In 2005, the Caribbean recorded a total of US$6.4 billion making remittances the second largest source of foreign finance for the region after private capital flows.
Remittances can boost a country’s Gross National Product (GNP) and can assist by reducing the shortage of foreign exchange, counterbalancing the balance of payments (BOP) deficits. The positive outcomes of remittances on production, inflation and imports will depend on how they are spent and invested.
Migrant remittances are a very stable financial source for developing countries and even though they might not be as important as FDIs, they do however, surpass the amount of FDIs received, development assistance, and capital market flows. And remittances are beginning in countries like India, China, Jamaica, etc., to be perceived as a long-term development tool; and some of the more relatively recent recipients of remittances, like Guyana, St. Vincent and the Grenadines, are restructuring aspects of their financial system to make remittances more attractive to donors in the Diaspora; and this would include creating banking incentives that would be mutually attractive to both donors and recipients.
Remittances help to reduce poverty, level consumption, create jobs, provide working capital, etc. It also affords people living in developing country to invest in human capital, such as, education, health and better nutrition. Remittances are fast becoming a development tool for long-term development.