Remittances in Lebanon and the Arab World: An Evaluation

 Remittances in Selected Arab Countries: 2023

Source: World Bank

World Remittances: Billion USD

Source: World Bank

It is estimated that at least 33 million Arabs live abroad with 44% staying within the Arab region and close to 80% of those in the GCC countries. Migrants are generally viewed positively, especially if they maintain ties with their home countries, transmitting back new ideas, investments, and technologies. They also send a lot of money. How much? And what is their impact?. This is what we want to look at in this note.

In 2023, the Arab world received 55 billion USD in remittances, close to 6.4% of the world total and 8.4% of the total for low-and-middle income countries. What is interesting, though, is that Arab remittances in 2023 were close to those in 2019 at 57 billion USD – in other word, they remained largely stagnant. However, the remittances for low-and middle- income countries followed an upward trend, increasing from 548 billion USD in 2019 to 656 billion USD in 2023. This indicates that Arab emigrants and expatriates, though increasing, are perhaps beginning to turn their back on their home countries. This is, of course, not a promising prospect, but it is also not surprising, given the unstable economic and political structures in many Arab countries[1].

In terms of individual countries, Egypt receives the most in remittances at 19.5 billion USD, followed by Morocco and Lebanon at 11.8 billion USD and 6.7 billion USD respectively. However, as a ratio of GDP, Lebanon comes first at 30.7%, followed by Palestine at 18.8% and Jordan at 8.8% — though Lebanon’s high ratio is biased upwards because of the low GDP due to its severe financial crisis. But the fact that the biggest recipients, Egypt and Morocco, have among the largest populations in the Arab world, at 115 million and 40 million respectively, means that in terms of remittances per capita Egypt receives 170 USD only whereas Morocco receives close to 300 USD. These low figures show that remittances in the Arab world are not only not increasing, but perhaps also not large enough to start with!

The above observation leads to an important question: are relatively limited remittances a good or bad thing? Remittances are usually hailed for their positive impact on investments and GDP, exchange rates and the balance of payments, and their economic synergies and exchanges between the host and home countries. But, on the negative side, remittances reflect the ‘brain drain’, could create dependency and have an adverse effect on incentives, and could increase consumption rather than investment; but, perhaps worst of all, they could allow an economy to muddle through and not resort to much needed reforms. In fact, evidence from Lebanon shows that remittances’ effect on the economy has been largely neutral on GDP and the balance of payments, implying that any presumed benefit have been nullified by the negative impact[2].

Two crucial implications emerge from the analysis above. First, the fact that remittances have been stagnant means that perhaps emigrants in the Arab world are burning their bridges with their original countries; and given that mostly it is the educated corps that are leaving, only much improved economic and political prospects can keep them or lure them back. Lebanon, of course, is a good case in point: its remittances fell from 7.2 billion USD in 2019 to 6.7 billion USD in 2023 at a time when the country witnessed intensive outpouring of its educated cohorts to stable foreign destinations[3]. Second, it is quite possible that the relatively limited remittances in the Arab world is a blessing in disguise, in that they can no longer sustain a maligned economic and political systems and consequently help usher in vital structural changes – but don’t bet on it!

[1] What underlies this reality is that the Arab world received 30 billion USD in Official Development Assistance (ODA) in 2023 but only 52 billion USD in FDI!

[2] Azar, S. et.al. 2020. “An IS-LM-BP Model for Lebanon”, International Research Journal of Finance and Economics, January (no. 177).

[3] It is possible that a fraction of the decline in Lebanese remittances is due to the resort to ‘un-official channels’, especially during the high crisis years of 2020-2021.

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