Hosein: Remittances 'low-hanging fruit' to ease forex challenges

MONEY sent back to the country from those who have migrated (remittances) is what economist Dr Roger Hosein believes is 'low-hanging fruit' to help alleviate the country's foreign exchange challenges.

Hosein delivered a presentation during the University of the West Indies' webinar on whether Caribbean countries were optimally using remittances to fund development.

In his presentation, Hosein calculated the country could benefit from up to US $647.08 million annually if it were to capitalise on the 27 per cent of its population residing abroad in the US, Canada and Europe.

"They are not poor. Our diaspora crowd abroad earns a fairly good median income in relation to all US workers over the age of 16 years and therefore have the capacity to remit resources."

Hosein acknowledged that there needs to be a multipronged approach to solving the issue such as an increased focus on manufacturing, more foreign direct investment, more tourism and remittances.

Data presented by economist Dr Regan Deonanan showed, though increasing, TT only receives around one per cent of GDP in remittances (US $162 million on average annually between 2014 and 2023). He said this is one of the lowest among Caricom countries.

Hosein said this equates to around US $131.80 per capita while the Caribbean average is US $594.

While Hosein's figure of US $647.08 million is a best-case scenario, he said even a median number like US $400 million is significant.

"That's a lot of remittances extra we can get if we were to pursue the right type of policies."

Hosein continued: "That's one of the frustrating things to me. This, to me, is a relatively low-hanging fruit."

Apart from being a viable source of foreign exchange, Hosein said it could also be a stable one.

This conclusion was based on an earlier assessment made by Dr Dilip Ratha, lead economist and economic adviser to the vice president of operations at the Multilateral Investment Guarantee Agency (MIGA) in the World Bank.

Dr Ratha said up to 95 per cent of migrants from Latin America and the Caribbean (LAC) go to the US and find success in its relatively strong job market. This is why he said the region has had strong remittance growth in recent years. He said this is unlikely to change with President Donald Trump's fight against immigration.

"They may not decline partly because...when countries back home have difficulty people send more money home. Partly because people who were planning to go back home won't go back home unless they really have to go back home because if they go back, they cannot come back so they will not go back."

"So the number of people staying here (in the US), for all you know, might even increase. That would be more remittances going back home. And if people do return back home voluntarily, they will go home with the money they have saved."

Ratha said data shows lower and middle-income countries received US $685 billion in remittances in 2024. That's more than the US $382 billion received in foreign direct investments and the US $256 billion received in official development assistance, combined.

The World Bank economist advised countries against taxation or regulating recipients of remittances on how the money should be used as a way of gaining access to the money. Instead, he suggested creative approaches like implementing a diaspora bond.

"Diaspora bonds could be a very potent way of raising the level of financing in the Caribbean region."

"When people send money, they also save money in the US. Migrants save money in the US almost a little more than how much they send to Jamaica or Central American countries or Caribbean countries. So that amount of money sitting in the US is often in a chequing account, or under the mattress...and the interest rate on those kind of savings is either zero or close to zero.

"So if Jamaica, or Guyana or Barbados...one of the countries wants to tap into the savings that their migrants have in the US, we could issue a diaspora bond. Face value could be US $500, US $1,000 or US $2,000 and people who have US $1,000 or US $2,000 in their chequing account can buy that bond and the interest rate can be as high as four or five per cent in dollar terms."

He also suggested the cost of sending remittances could be lowered to encourage migrants to send money home.