High foreign remittances from Saudi Arabia indicate good governance

According to World Bank data, foreign remittances from Saudi Arabia increased to SR144 billion ($38.4 billion) in 2024, the highest level since 2021 — placing the Kingdom third globally, with the US taking the top spot at $85.8 billion. 

Historically, foreign remittances in Saudi Arabia have fluctuated periodically, increasing for 17 years and declining for 13 years. The year 2024 ranks as the seventh-highest in total remittances, with the peak in 2015 at $46.7 billion. 

The largest beneficiaries of global remittances are India, Mexico and China, collectively receiving $235.5 billion in 2023. For many families, these remittances serve as a primary source of income and a critical means of financial stability. 

Foreign remittances play a crucial role in ensuring a decent standard of living in more than 125 countries worldwide. In 2022, the total value of remittances to these countries was estimated at $630 billion.

According to the International Organization for Migration, affiliated to the World Bank, the top five recipient countries in 2021 were India, China, Mexico, the Philippines and Egypt, with about $265 billion. Some nations, such as Lebanon, rely heavily on remittances, which account for 45 percent of its total economy. 

The impact of foreign remittances extends beyond financial support, as studies indicate their role in reducing poverty levels in recipient countries. For example, remittances have contributed to an 11 percent reduction in poverty rates in Uganda and a 6 percent decrease in Bangladesh. 

The countries most dependent on financial remittances as a percentage of gross domestic product, based on 2022 figures, include Tonga, Lebanon, Samoa, Tajikistan, Kyrgyzstan, Honduras, South Sudan, El Salvador, Haiti, India, Guatemala and Mexico. Their dependence ranges from 49.9 percent in Tonga to 11.5 percent in Mexico.

It is important to note that remittances do not necessarily benefit countries overly reliant on them, as they disrupt and eventually paralyze economic growth. 

Half of global financial remittances support the economies of regions where 75 percent of the world’s poor reside. According to a World Bank report from three years ago, Egypt was top in the Arab world, followed by Morocco, Lebanon, Jordan, Tunisia and Sudan. The figures ranged from $32.3 billion (6.9 percent of Egypt’s GDP) to $1 billion (2.4 percent of Sudan’s GDP).

The World Bank had in the past predicted a slowdown in the pace of Arab foreign remittances due to economic recession, rising global inflation levels, the Ukraine crisis, fluctuating energy prices and currency exchange rates. 

This prediction has materialized, as financial remittances to the Middle East and North Africa region decreased significantly in 2023, stabilizing at $55 billion. The decline continues, and most of the aforementioned countries are facing a genuine financial predicament and are striving to devise solutions.

Around 200 million people worldwide send remittances to improve the living conditions of approximately 800 million others. The volume of these transfers varies across countries due to economic, social, and political factors. 

These financial transfers are of increasing value, reaching $802 billion in 2022, and projected to rise to $5.4 trillion by 2030, because they are important in alleviating poverty, and achieving sustainable living. Additionally, in many countries, remittances serve as a primary source of foreign currency reserves, second only to national exports.

It is inaccurate to consistently portray foreign remittances as entirely negative, especially in sending countries. In the case of Saudi Arabia, remittances reflect a robust economy, high government spending, and investment in massive multi-billion-dollar projects. 

Consequently, the large numbers of foreign workers, both in office and field positions, are a focus of attention. They contribute as investors, white-collar employees, or less-skilled blue-collar workers. A portion of their earnings are spent in Saudi Arabia, which benefits the nation.

The factors influencing this domestic spending include the significant foreign investments within Saudi Arabia. In addition, foreigners can now own shares in real estate companies up to 49 percent, including in Makkah and Madinah. And there is robust legislation guaranteeing the rights of investors and foreign workers.

Saudi Arabia’s Finance Minister Mohammed Al-Jadaan stated at the World Economic Forum in Davos this year that for every dollar spent by the Kingdom’s government, $200 in returns are generated, indicating that local benefits are indeed being realized.

Therefore, there is no justification for pessimistic interpretations regarding remittances.

• Dr. Bader bin Saud is a columnist for Al-Riyadh newspaper, and a media and knowledge management researcher. He is a university professor in crowd management and strategic planning, and the former deputy commander of the Special Forces for Hajj and Umrah in Saudi Arabia. X: @BaderbinSaud.