The last decade brought about a sharp rise in external remittances in all source countries in the region, reaching as much as 50 percent of GDP in Tajikistan, followed by 31 percent in Moldova, and 28 percent in the Kyrgyz Republic. These huge foreign exchange earnings eased the pressure in these economies which were meanwhile struggling with slow market reforms and unstable macroeconomic environments. The remittances received by households from abroad are additions to their income, helping them to meet their basic needs and, hence, contributing significantly to poverty reduction. The workshop participants discussed the demographics of remittance-receiving households across the selected countries in the region, analyzing their similarities and differences, and discussed the poverty impact of the remittances.
“The issues raised at the workshop were especially urgent for Armenia at a time of global recession, where a drastic decline in remittances was a primary challenge for policymakers concerned with poverty and household welfare”, said Luca Barbone, Sector Director for Poverty Reduction and Economic Management in the Europe and Central Asia region of the World Bank.
Overall, migration and remittances have become an important development issue for Armenia in the last decade. By 2006, 11.8 percent of households in Armenia had a migrant member residing abroad. More than half of these households received remittances from their emigrant family member. In addition to this, Armenians also enjoyed money transfers from non-immediate family members outside of the country, leading to total of 700,000 Armenians receiving external remittances. According to the 2007 Integrated Living Conditions Surveys (ILCS), the share of remittances in total income of households receiving remittances from abroad was almost 60 percent. In aggregate terms, remittances totalled 13.5 percent of Armenian GDP, as compared 1.8 percent average for the region.
“In 2007, remittances in the CIS countries exceeded official development assistance to these countries by a factor of six”, saidSudharshan Canagarajah, Lead Economist in charge of migration issues in the Europe and Central Asia region of the World Bank. “Although remittances are generally more resilient to external economic fluctuations than private or official capital flows, they drastically declined amidst the worst financial crisis in decades”.
These questions generated profound discussions among the workshop participants in relation to policy responses by countries. Are the monetary authorities concerned with real exchange rate appreciation driven by high inflows of remittances, and how do they address this issue to reduce the adverse effect on the countries’ competitiveness in the international markets? To what extent did the governments of labor-exporting countries use a fiscal stimulus to provide better safeguards for households hit by the recession?
One of the key visible long-term gains to labor-exporting countries comes through Diaspora channel. The invited prominent speakers from the international community and the Armenian Diaspora highlighted the importance of public policies in both source and recipient countries in building effective ties with emigrants abroad.
“A highly motivated Diaspora can become an engine for growth for source countries that otherwise lack critical capacity and institutions needed to speed up their development”, said Gagik Torosyan, Executive Director, Economic Development and Research Center of Armenia which co-hosted the workshop with the World Bank.
There are many success stories in the region facilitating transfer of knowledge, technology, and foreign direct investment, which, however, require more coordination and attention from all parties to become the key to growth and poverty reduction for the region.