In addition to sending money to their families, international migrants hold significant savings in their destination countries. 'Diaspora savings' attributed to migrants from developing countries were estimated at $497 billion in 2013, the latest data available.

 

"Total remittances in 2014 reached $583 billion. This is more than double the ODA in the world. India received $70 billion, China $64 billion, the Philippines $28 billion. With new thinking these mega flows can be leveraged to finance development and infrastructure projects," said Kaushik Basu, World Bank Chief Economist and Senior Vice President. He pointed out, "Israel and India have shown how macro liquidity crises can be managed by tapping into the wealth of diaspora communities. Mexican migrants have boosted the construction sector. Tajikistan manages to nearly double its consumption by using remittance money. Migrants and remittances are clearly major players in today's global economy."

 

In a special analysis on leveraging migration for financing development, the Brief estimates that as much as $100 billion in migrant savings could be raised annually by developing countries by reducing remittance costs and migrant recruitment costs, and mobilizing diaspora savings and philanthropic contributions from migrants.

 

"The moderation in the growth of remittances will be hard on many poor people. The affected countries may have to consider creative ways of smoothing the shock. Fortunately, migration and remittances can be leveraged for innovative financing," said Dilip Ratha, Lead Economist, Migration and Remittances, at the World Bank's Development Prospects Group and Head of the Global Knowledge Partnership on Migration and Development (KNOMAD).

 

"As to long-term financing needs for the Post-2015 Development Goals, I would love to see a bullet train system in India, an international airport in Nigeria, another Suez Canal in Egypt, a hydro-project in Pakistan, a community development program in the Philippines, all financed by mobilizing the power of remittances and diaspora savings."

 

Future inflows of remittances can be used as collateral to facilitate international borrowings by national banks in developing countries. Remittances can also facilitate access to international capital markets by improving sovereign ratings and debt sustainability of recipient countries.

 

Because remittances are large and more stable than many other types of capital flows, they can greatly enhance the recipient country's sovereign credit rating, thus lowering borrowing costs and lengthening debt maturity, says the Brief. In a recent development, rating agencies have started accounting for remittances in country credit ratings, but given data difficulties, there is still room for further improvement.

 

And, the joint World Bank-IMF low-income country Debt Sustainability Framework now includes remittances in evaluating the ability of the countries to repay external obligations and their ability to undertake non-concessional borrowing from other private creditors.