Key Points
Besides capital, the other source of foreign reserves for several low-income and developing (middle-income) economies (LMICs) includes remittances..
A further breakdown of these flows by regions shows that in 2023, remittance inflows grew by 8 per cent for Latin America and the Caribbean, by 7.2 per cent for South Asia, by 3 per cent for East Asia and the Pacific, and by 1.9 per cent for Sub-Saharan Africa..
At the present global average cost of 6.2 per cent, the high transaction cost amounts to an additional tax on cross-border movement of incomes..
Indias recent initiative to deploy its digital public infrastructure (DPI), particularly the UPI, to allow cross-border payments demonstrates the possibility of a low-cost remittance mechanism that can be readily deployed..
A better alternative would be to have a similar initiative at a global level, with investments in developing similar global digital public infrastructure that can be deployed for a unified payments interface that would allow seamless settlements of remittances at a lower transaction cost..
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