7 Workers ’ Remittances: An Important and Stable Source of External Development Finance

AS PRIVATE CAPITAL FLOWS HAVE DECLINED,workers ’ remittances have become an in-creasingly prominent source of external funding for many developing countries. This chap-ter examines the relative importance of workers’ remittances as a source of development finance and discusses measures that industrial and devel-oping countries could take to increase remittances. The main messages are: • Remittance flows are the second-largest source, behind FDI, of external funding for developing countries. In 2001, workers ’ remittance re-ceipts of developing countries stood at $72.3 billion, much higher than total official flows and private non-FDI flows, and 42 percent of total FDI flows to developing countries (table 7.1). Remittances to low-income countries were larger as a share of GDP and imports than were those to middle income countries. Remit-tances are also more stable than private capita