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Libyan Exodus Shrinks Remittances

Simba Russeau

CAIRO, Apr 13 2011 (IPS) - The exodus of migrants streaming out of Libya due to ongoing unrest has highlighted the heavy dependence of some countries on remittances from their citizens working abroad. In several countries this flow has now become choked.

“With thousands returning home the economic impact of the unrest in Libya is that remittances will be reduced,” Dr. Mizanur Rahman, economist and research fellow at the National University of Singapore told IPS.

“Most workers travel to the region under adverse payment systems, which means they need to pay anywhere between 2,000 dollars to 3,000 dollars to secure their visas. In order to raise the money they resort to various means like selling their land, and in the end when this money halts it disrupts the entire family economics.”

Recent World Bank statistics indicate that developing countries got more than 325 billion dollars last year from migrant worker remittances, outstripping foreign direct investment and development assistance combined.

According to a recent survey carried out by the African Development Bank (ADB), remittances sent home by African migrants have quadrupled in the last 20 years. They hit the 40 billion dollar mark in 2010.

Massive land grab in some African countries, forcing those that would be growing food to feed their families off their lands, has resulted in large numbers getting onto rickety boats and risking their lives to try and migrate out.

Stable economies like Libya were a hub for migrants from African countries, Emira Woods, co-director of Foreign Policy In Focus at the Institute for Policy Studies based in Washington told IPS. Migrants headed to Libya, and out through there because they were unable to withstand huge increases in the price of food and staple goods back home.

“Remittances are this sleeping giant in terms of development finance that has awakened. They create a financial tie between people and their communities by helping to build clinics, schools, roads and other infrastructure development projects,” says Woods.

“There are some efforts to harness more the strategic resources from remittances, which have created a space for governments to act independent of external actors like the World Bank or the International Monetary Fund (IMF) whose interest and loan conditions have failed to serve the needs of Africa.”

Libya has been a major destination for migrant workers following the 1969 revolution led by Gaddafi against King Idris. Construction workers from Tunisia, teachers from Egypt and Palestine and healthcare workers from Yugoslavia and Bulgaria poured in to assist in rebuilding.

Two decades later, a second wave of migrants swept in, mainly from Asia, sub-Saharan Africa and West Africa, to take advantage of the relatively high salaries of almost 300 dollars per month for unskilled labour.

On the macro level, says Dr. Ibrahim Awad, Director of the Center for Migration and Refugees Studies at the American University in Cairo, remittances assist in reducing chronic trade deficits and contribute to balancing the economy in countries like Egypt due to their resilience and countercyclical nature. This helps sustain consumption and investment during economic downturns.

But, he says, the countries that sent labour now face an exodus of migrants fleeing violence in Libya. The countries face an increase in the demand of jobs as unemployed workers return. Reliance on remittances to spur economic activity as a means of reducing poverty is slowing down.

“The crisis highlights the dependence some migrant sending countries have on remittances. In some countries remittances constitute over 30 percent of the Gross Domestic Product (GDP) like in Egypt. Reliance on this money influx suggests that any reduction will mainly impact the household level as well as create external financing gaps, which are hard to fill,” Dr. Awad told IPS.

With no end to unrest in sight, concerns are growing amongst some developing nations that turmoil in the region could spread to oil-rich Gulf states where foreign labour adds up to more than 11 million.

Instead of waiting for the rebellions to die down in order to send migrants to Libya again or redirect efforts in locating new markets, labour sending countries should adopt appropriate policy measures to end reliance on labour export, and create incentives that encourage their nationals to stay home, Dr Awad said.

“Migrant sending countries should not rely solely on migration as a means of solving unemployment. The issue of lack of jobs should be solved internally. Countries of origin should therefore put in place effective policies for the reinsertion of returning migrant workers into their labour markets by creating decent work where people live.”

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