Remittances complementing other sources of capital
July 11, 2009 | By Christopher | Filed Under Letters
It is impossible to ignore the positives that remittances offer to the development of poor nations like Guyana. The reality is that, developing countries depend on remittances for the benefit of their people and the spin-offs from the multiplier effects are important.
Remittances are not the only financial source for developing countries, but it should be seen as another branch on the tree complementing the other sources of support. The multiplier effect of remittances should be promoted and any negative spin on the positives of remittances is unintelligent. 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 is 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.
When people spend remittances on basic needs, retail sales are boosted and will then demand more goods and services which 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.
Remittances can boost a country’s Gross National Product and can assist by reducing the shortage of foreign exchange, counterbalancing the balance of payments 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 foreign direct investments (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 to developing countries have reduced inequality and poverty and have increased growth and development. They also help to reduce poverty, level consumption, create jobs, provide working capital, etc., and afford people living in developing countries to invest in human capital, such as, education, health and better nutrition. Remittances are fast becoming a tool for long-term development.