Money sent home by migrants competes with
international aid is one of the largest financial inflows to
developing countries. In 2013, according to the
World Bank Report, $404 billion went to developing countries (a new record) with overall global remittances totaling $542 billion. Remittances are playing an increasingly large role in the economies of many countries, contributing to economic growth and to the livelihoods of less prosperous people.
Migrants send approximately 10% of their household incomes; these remittances made up a corresponding 50–80% of the household incomes for the recipients.
Remittances to Africa play an important role to national economies, but little data exists as many rely on informal channels to send money home. Today's African Diaspora consists of approximately 20 to 30 million adults, who send about USD 40 billion annually to their families and local communities back home. For the region as a whole, this represents 50 percent more than net official development assistance (ODA) from all sources, and, for most countries, the amount also exceeds foreign direct investment (FDI). In several fragile states, remittances are estimated to exceed 50 percent of GDP. Next to petrodollars, the second biggest source of foreign exchange earnings for Nigeria are remittances sent home by Nigerians living abroad.
The list of recepient Countries in the World of remittances from abroad include even top Countries in Europe like Germany, (Yes Germany receives money from its migrant workers abroad.)France, Spain, Belgium, even other non European Countries like China, Nigeria, Mexico and India.
Remittances are not a new phenomenon in the world, being a normal concomitant to migration which has always been a part of human history. Several European countries, for example Spain, Italy and Ireland were heavily dependent on remittances received from their emigrants during the 19th and 20th centuries. In the case of Spain, remittances amounted to the 21% of all of its current account income in 1946
Foreign Currency Reserves (Forex Reserves). This is the amount of foreign currency reserves that are held by the Central Bank of a country.In general use, foreign currency reserves also include gold and IMF reserves. Also, people may take into account liquid assets that can easily be converted into foreign currency.
The most common currency for holding foreign currency is the dollar with 64%, the Euro is increasing its share and now accounts for 26%.
Reasons for Holding Foreign Currency Reserves
Influence the exchange Rate. With large foreign exchange reserves, a country can target a certain exchange rate. For example, suppose China wanted to increase the value of its currency the Yuan. China could sell it's dollar reserves to buy Yuan on the foreign exchange markets. The increased demand for Yuan would appreciate the Yuan. Actually, the Chinese have been trying to keep the Yuan undervalued by selling Yuan and buying Dollars. This is why China has so many Dollar reserves. In a fixed exchange rate, foreign currency reserves can play an important role in trying to keep a target exchange rate.
Act as a Guarantor for Liabilities such as External Debt. If a country holds substantial foreign debt, holding foreign currency reserves can help to give more confidence in the country's ability to pay. If countries have dwindling foreign currency reserves, there is likely to be a deterioration in a country's credit worthiness.
Often an increase in foreign currency reserves may simply reflect a large current account surplus and a desire to prevent the currency appreciating too much. By buying foreign currency the domestic currency is kept lower than it would otherwise have done.