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Remittances—understood as the cross-border transfer of money by migrant workers to their families back home— are a vital source of external financing for many developing countries, including several that are especially vulnerable. They are an important income source for millions of households, supporting consumption, education, healthcare, and investments that contribute to the Sustainable Development Goals (SDGs). Deriving from economic activity in other countries, they can also provide insurance against downturns in the recipient’s own country. However, the outlook for remittance flows is changing.
Despite ongoing growth of remittances following a swift rebound after the pandemic, stricter migration policies and new remittance taxes in major host countries risk weighing on remittance prospects. Meanwhile, technological advances—particularly the increasing adoption of artificial intelligence (AI)—may reshape labour demand in host countries, potentially displacing some jobs while creating others, leaving the overall impact on migration and remittances uncertain. These evolving challenges call for targeted policies to sustain remittance flows, reduce transfer costs to less than 3 per cent of the amount remitted (as set in SDGs target 10.c), and enhance their contribution to inclusive and sustainable development.
Recent trends of remittance flows to developing economies
Officially recorded remittances to low- and middle-income countries have remained significant, reaching nearly $700 billion in 2024, a growth of 10.0 per cent following a subdued 1.2 per cent expansion in 2023. This resilience reflects a combination of strong labour-market performance in major host economies and the continued adaptability of migrants to global shocks (Ratha, Plaza and Kim, 2024). Compared with foreign direct investment (FDI) and official development assistance (ODA), remittance inflows to developing countries are less volatile. In both 2023 and 2024, remittances exceeded the combined total of net FDI and ODA flows to developing countries, underscoring their significant contribution to development (figure 1).
In 2025, most developing regions continued to experience increasing remittance inflows. However, substantial variation persists at the country level. Remittances continue to be driven by economic conditions in host countries but are also influenced by other factors such as changing national migration policies or digital technology adoption that can facilitate transfers. Over the late 2000s and early 2010s, remittance growth tracked global economic performance and financial conditions more closely (Monterroso and Vilán, 2025).
In Africa, growth of remittance inflows has been robust, mainly driven by a sharp increase in transfers to Egypt since the second quarter of 2024 (figure 2a). The remarkable recovery in Egypt followed the March 2024 shift to a flexible exchange-rate regime, which closed the gap between the official and parallel market rates and helped restore confidence in the banking system (IMF, 2025). In Nigeria, remittance inflows peaked in 2024— the highest level in five years—amid efforts to stabilize the foreign exchange market and enhance collaboration with money-transfer operators (Central Bank of Nigeria, 2024). However, softening global growth and fewer job opportunities abroad contributed to a 4.2 per cent decline in the first quarter of 2025 (World Bank, 2025). At the same time, remittance flows to sub-Saharan African countries remain volatile, affected by exchange rate dynamics, rising transaction costs and political instability in some major sending and receiving countries. In the first quarter of 2025, the cost of sending $200 to sub-Saharan Africa averaged close to 9 per cent, up from 7.7 per cent a year ago, and well above the global average of 6.4 per cent and the SDG target of 3 per cent (figure 3).
Remittances to East Asia have remained largely stable, supported by continued inflows to Indonesia, the Philippines, and Thailand. In contrast, smaller and more remittance-dependent economies in the region have faced slower growth of inflows. In Samoa, for example— where remittances accounted for more than a quarter of GDP in 2024—receipts stagnated in the first quarter of 2025, reflecting easing labour demand and subdued economic activity in major host countries, notably Australia and New Zealand (Central Bank of Samoa, 2025).
In South Asia, remittance inflows have maintained double-digit growth since the fourth quarter of 2023, driven by robust flows to Bangladesh, India, and Pakistan (figure 2b). In 2024, India alone received $137 billion, retaining its position as the world’s largest recipient. This momentum has continued into 2025. The growing share of high-skilled Indian workers in sectors such as science, technology, engineering, finance, and healthcare—particularly in the United States and Europe—has translated into higher remittances per worker (Nandy, 2025). Improved exchange rate stability and government efforts to promote formal transfer channels have fuelled remittance growth to Pakistan (Siddiqui, 2025). In Bangladesh, inflows have benefited from policy measures—such as incentives for using formal transfer systems and tighter controls on informal “hundi” channels1—which have redirected flows into the official banking network (Bangladesh Bank, 2025).
Western Asian countries have experienced particularly volatile remittance flows. The latest data show that flows to Lebanon—the region’s top remittance destination, accounting for about 30 per cent of total remittances to Western Asia in 2024—declined by 13.4 per cent in 2024.2 The spread of conflict into Lebanon disrupted the country’s gradual recovery path after the severe economic crisis of 2018–2020, while prolonged economic challenges further eroded confidence in formal transfer channels (Yaghi, 2024).
Remittance flows to Latin America and the Caribbean grew by 10.9 per cent in the first quarter of 2025, after subdued growth in 2024 (figure 2c). The strong performance was mainly driven by inflows to Central American countries, notably Guatemala and Honduras. This reflects the impact of tighter migration policies in the United States, the region’s largest source of remittances (figure 4), as rising concerns about deportation have prompted migrants to send more money home to bolster household savings (Wagner, 2025). In addition, remittance flows typically lag migration trends by one to two years, as newly arrived migrants need time to secure employment and accumulate savings—so the effects are not immediate. Large emigration waves between 2018 and 2023 from Guatemala and Honduras have supported continued strong remittance growth (Estevão and others, 2025). By contrast, remittance flows to Mexico declined by 11 per cent year-on-year in the second quarter of 2025, reflecting fewer new migrant arrivals and lower transfers from existing workers.
Remittance flows to the Commonwealth and Independent States (CIS) are gradually normalizing after the disruptions caused by the outbreak of the war in Ukraine in 2022. In the first two quarters of 2025, remittances reached record-high levels in several Central Asian countries, largely offsetting the continued weakness of inflows to Ukraine. This increase primarily reflects rising nominal wages in the Russian Federation—the region’s main source of remittances (figure 4)—driven by record-low unemployment, labour shortages in key sectors, and the appreciation of the rouble since January 2025. Although many Russian banks are disconnected from the SWIFT system3 and major money transfer operators such as MoneyGram and Western Union exited the Russian market in 2022, migrant transfers have continued through alternative channels. Connection between some Central Asian banks and the Russian System for Transfer of Financial Messages (SPFS), along with the development of fintech and mobile banking solutions, has facilitated migrant transfers across the region. Meanwhile, although remittances remain a crucial income source for many families in the Caucasus and Central Asia, their relative importance has declined in recent years. In Kyrgyzstan, the ratio of remittances to GDP fell from around 32 per cent in 2021 to 17.7 per cent in 2024, while in Armenia, it declined from 11.2 per cent to 5 per cent over the same period.
Emerging risks and uncertainties shaping remittance outlook
Remittance flows are expected to keep expanding in the coming years, albeit at a slower pace. Demographic pressures in developed economies, income disparities between developed and developing economies, regional conflicts, and climate-related disasters will remain key drivers of migration—and, by extension, of remittance flows. However, a number of emerging risks could weigh on remittance prospects. Slower economic growth amid elevated policy and geopolitical uncertainties may constrain migrants’ earnings and transfer capacity. Changes in migration policies and rising transaction costs in key host countries could affect both the volume and the channels of remittance flows. In the medium term, structural transformations in labour markets—driven by technological advancement— may further disrupt traditional migration patterns. While automation and digitalization could displace some lowand medium-skilled jobs, they may also create new roles and opportunities, leaving the overall impact on migration and remittance flows highly uncertain.
Shifting migration policies
Changing migration policies in major remittance-sending countries have emerged as a key source of uncertainty for future remittance flows. In the United States, for instance, authorities have intensified efforts to regulate both regular and irregular migration in 2025, introducing travel bans, expanding deportations, and heightening visa screenings. Such measures have prompted a surge in precautionary remittances among some Central American diaspora communities. Nevertheless, the overall impact is likely to turn negative in the coming year. Estevão and others (2025) estimate that inflows to Latin America could fall by more than 10 per cent in 2026 compared with 2024 levels.
In the European Union, migration reforms have taken a dual approach—facilitating regular migration while tightening control over irregular movements (Mentzelopoulou, 2025). The revised Blue Card Directive (2023) and recast Single Permit Directive (2024), for instance, aim to attract skilled workers to address demographic and labour-market challenges. Meanwhile, the New Pact on Migration and Asylum, adopted in 2024 and set to become operational in 2026, strengthens border management and return procedures to limit irregular entries (European Commission, 2025).
The implications of these migration policy shifts are likely to vary across countries and to unfold gradually over time. Historical experience suggests that when tighter controls on undocumented migration are accompanied by expanded employment-based migration opportunities, overall remittance flows may still rise. This is because higher and more stable earnings among legally employed migrants can offset, or even outweigh, the decline in transfers from undocumented workers (AmuedoDorantes and Puttitanun, 2014). Conversely, when migrants face greater enforcement risks or uncertain legal status, they are more likely to avoid formal channels, such as banks and money-transfer operators. They may instead rely on informal systems that are harder to track and often more costly or slower, reducing recorded remittance flows (Amuedo-Dorantes, 2014).
Taxing remittances
Taxing remittances is not a new idea. Several countries that host large migrant populations, such as Gulf Cooperation Council (GCC) countries, have considered levying taxes on outward remittances to raise revenue and discourage undocumented migrants. Gabon and Palau implemented to tax outbound money transfers in 2008 and 2013, respectively. However, the tax collections were insignificant (IMF, 2016). Some remittance receiving countries have also explored taxing inward remittance flows (Ratha, De and Schuettler, 2017). El Salvador removed its tax on inward remittances in 2024 to attract more inflows (Reuters, 2024).
Recently, the United States has announced a 1 per cent tax on remittances—applicable to all remittance senders—effective January 1, 2026 (United States Government, Internal Revenue Service, 2025). Preliminary research estimates that this new tax levy could reduce remittance flows from the United States by about 1.6 per cent (Dempster, Ward and Huckstep, 2025).4 The burden of the U.S. remittance tax is likely to be uneven, falling more heavily on smaller and more remittance-dependent economies. These are expected to correspond to the current contribution of U.S.-originating remittances in the receiving countries, with the largest impacts in absolute terms being felt in India and Mexico. Relative to gross national income (GNI), the heaviest impacts are projected for some Central American and Caribbean economies, including El Salvador, Guatemala, Haiti, Honduras, and Jamaica. In several Central American economies, the tax could lower household incomes, undermine poverty reduction efforts, weaken consumer demand, reduce foreign exchange reserves and heighten exchange rate pressures (Sofianou, 2025).
Artificial intelligence
Advancements in AI, information processing, robotics, autonomous systems technologies and digital access are driving major shifts in labour demand (World Economic Forum, 2025). Jobs in certain low- and middle-skilled occupations (such as clerical and secretarial workers) are increasingly at risk of displacement, while demand is created for both frontline roles (including farm workers, construction workers, and care-economy roles) and technology-based professions (such as AI and machine-learning specialists, data scientists, and fintech engineers). According to the World Economic Forum (2025), AI and information processing technology are projected to create 11 million jobs, while simultaneously displacing 9 million others over 2025 and 2030, more than any other technological change over a similar timescale. These shifts in labour demand could influence global migration patterns and, consequently, remittance trends: source countries with large pools of routine industrial or clerical workers may experience weaker overseas employment prospects and slower remittance growth, whereas those capable of supplying workers to the expanding care and technology sectors could see more robust or even rising inflows.
At the same time, AI-driven systems are enabling moneytransfer providers to process cross-border transactions more quickly, accurately and at lower cost. Machine-learning models now automate key functions such as identity verification, fraud detection, and dynamic pricing of currencyexchange fees, thereby reducing costs and improving the customer experience (Tech Remit, 2025). From a regulatory perspective, AI can enhance compliance with anti-money laundering and countering the financing of terrorism (AML/CFT) requirements by automating the monitoring and tracking of cross-border flows (Yu, Xu and Ke, 2024). Yet, the same technologies also raise new challenges related to algorithmic transparency, data privacy, and cybersecurity threats.
Securing the role of remittances in advancing sustainable development
A slowdown or decline in remittance inflows would disproportionately affect economies that are heavily dependent on these transfers (figure 5).
Economically, remittances provide critical income support to households, helping to stabilize consumption and overall economic activity. They boost purchasing power, stimulate domestic demand, and often act as a countercyclical buffer for migrants’ home countries—rising during crises when other sources of external finance (such as FDI, ODA or tourism receipts) could fall.5 If remittance growth weakens, the immediate impact on household consumption may be limited, but a prolonged downturn would likely erode disposable income, constrain domestic demand and slow economic activity. In some cases, lower remittance inflows could reduce foreign-exchange reserves, intensify balance-of-payments pressures and increase exchange-rate volatility, with broader implications for macroeconomic stability. Moreover, a downturn in remittances could limit governments’ ability to mobilize remittance-linked savings for productive investment and advance financial inclusion. Remittances often represent households’ first contact with the formal financial system, providing an entry point to savings, credit, and insurance services (Ardic and others, 2022).
From a social perspective, a slowdown or decline in remittance inflows threatens to dampen the positive impact on poverty reduction and human capital development. A recent study covering 130 developing countries between 1990 and 2019 finds that a 10 per cent increase in per capita remittances is associated with a 1.3 per cent reduction in poverty levels, highlighting a direct income-boosting effect and an indirect impact through improved access to food, education, healthcare, and other essential services in recipient households (Garcoa-Fuentes, Kennedy and Ash, 2025). Conversely, a sustained decline in remittances could heighten vulnerability to economic shocks, food insecurity, and health risks, compounding the adverse impact of anticipated decline in ODA.6 For women, reduced remittance inflows may constrain economic opportunities and slow advances in empowerment and financial independence (Fakir and Abedin, 2021).
Lowering fees, reducing transaction costs, strengthening oversight to curb illicit flows and expanding formal channels are essential to secure remittances. Mobile transfers and online platforms already offer faster and cheaper cross-border payments (figure 6); however, access remains uneven, especially in rural areas where digital infrastructure is weak, and among women who remain less likely than men to hold mobile money accounts. Enhancing digital infrastructure and improving financial literacy— particularly among vulnerable populations—will be important to ensure that digital remittance services are available and inclusive (Rodima-Taylor, 2023).
Strengthening oversight mechanisms is equally important to prevent misuse, particularly as migration policy shifts and higher transaction costs from new taxes could encourage the use of informal remittance channels and increase the risk of illicit flows. Advanced analytics and AI techniques can be deployed to enhance monitoring systems and detect anomalous or suspicious transactions more effectively. Stronger international cooperation— including alignment with the Financial Action Task Force (FATF) standards—can further harmonize regulations and curb cross-border illicit remittance activity.
Finally, policy efforts can extend beyond facilitating remittance transfers to mobilizing remittance-linked savings for development. Encouraging diaspora bonds—a debt instrument issued by a country (or potentially, a sub-sovereign entity or a private corporation) to raise financing from its overseas diaspora—can help channel remittances into finance infrastructure projects, social programmes, and expansion of local industries. Countries, such as Ethiopia, Ghana, India, Kenya and Nigeria have successfully issued diaspora bonds (World Bank, 2023). Governments may also collaborate with international or regional financial institutions to develop remittance-matching programmes or communitybased microfinance initiatives that advance development priorities (Berg and Bledsoe, 2025). To be effective, these initiatives must be supported by a strong overall investment climate and sound financial markets in developing countries.
In conclusion, remittances are one of the most resilient and inclusive forms of external financing for developing economies. Ensuring that remittance flows remain stable, affordable, and transparent will be essential to preserve their role in poverty reduction, human capital gains, and financial inclusion. Yet, risks to future remittance flows into developing countries are emerging amid policy headwinds, economic uncertainty and technological change. Actions to advance digital and financial innovation, strengthen regulatory frameworks, and mobilize diaspora resources will help safeguard this important income for households and leverage remittances to support long-term sustainable development.