The Hidden International Cost of Global Recession - Remittances

One of the worst kept secrets to the growth of the developing world is the massive financial aid pouring in the form of remittances. Huge diaspora populations in the developed world send money back to their countries of origin in the form of remittances - often a single worker supports a multi-generation family in their old homes.

In Africa, for example, remittances have outstripped Foreign Direct Investment in dollar count for half a decade. FDI in 2005 total $15 billion USD for the entire continent, whereas remittances totalled $17 billion. While these totals are over-shadowed by the $25 billion dollars in official development aid (which is mostly spent on humanitarian subsistence projects.

The millennium development goals and many other models for global development indicate that Africa must receive nearly double the inflows of cash to attain sustainability of the MDG outcomes ; so every dollar counts.

The synchronized global recession puts these remittances under severe threat. The risk to labour jobs is stiff, and those jobs under the greatest threat are those disproportionately filled by immigrant workers. Moreover, the financial protectionism that is very trendy in political circles (particularly American) puts at threat the typical channels through which remittances are made.

Changes to the legal framework of financial structures could render such remittances illegal or infeasible, cutting off a huge source of funding for Latin America, Africa and SE Asia.

What was the fastest growing source of international finance for the developing world is under significant threat by the global recession - we must be very careful when recommending financial policy that could place these mechanisms under threat, we may have to pick up the tab down the road and it will have accrued interest.