Lebanon's remittances: UNDP report sheds light on high remittances-to-GDP ratio

The United Nations Development Program (UNDP) recently launched a detailed report titled "The Increasing Role and Importance of Remittances in Lebanon."  

Presented at a press conference held at the UNDP headquarters in Beirut, the report explores the significant economic and social contributions of financial inflows from the Lebanese diaspora, emphasizing their growing importance in recent years amidst the country's ongoing financial crisis. 

The report measures diasporic financial inflows, distinguishing between two primary types: worker remittances, mainly consisting of familial aid from migrants abroad, and non-resident deposits (NRDs), which are investment-based.  

By examining the sources of these inflows and their potential utilization by recipient families and sectors, the report provides valuable insights that enhance the economic interaction of the diaspora with the domestic economy. 

The report highlights the enduring significance of remittances to Lebanon's economy, with an annual amount of approximately $6 to $7 billion, despite the challenging economic and financial conditions.  

Lebanon stands out in the MENA region with the highest remittances-to-GDP ratio, reaching 37.8 percent in 2022, and ranks as the third-highest recipient of remittances in terms of value. 

While the size of remittances remains steady, the report reveals a significant increase in the cost of transferring them to Lebanon. With an average remittance cost of 11 percent, higher than the global average of 6 percent and that of neighboring MENA countries, this presents a challenge.  

Consequently, there has been a shift from formal to informal channels, such as in-person cash handouts, for receiving remittances. 

The report highlights the impact of remittances before and after the 2019 financial crisis. Previously, remittances primarily supported familial needs and enabled households to invest in human capital and access essential services through cash and food assistance.  

However, due to currency depreciation and soaring inflation, remittances have become a crucial social safety net for a relatively modest share of Lebanese families, mitigating the erosion of purchasing power and income. 

Beyond the economic impact, the report emphasizes the potential role of the Lebanese diaspora in reversing development losses and shaping the country's future.  

It highlights the need to effectively channel diaspora funds by establishing an appropriate governing framework. 

It also suggests various improvements to optimize the benefits of remittances, including better definitions and accurate data on financial flows, improving the business environment to restore confidence, transparent mechanisms for local investments, promoting digital solutions for affordable transfers, and reducing the high-cost of transfers.