Remittances are the funds which are sent by people working outside their home country to their families. These funds have a huge impact on the economic growth of a country. Countries with an ongoing struggle for economic development receive the greatest amount of remittances. Remittances are important for economic growth. It impacts the economy in many ways. The impact can be seen on both family and national levels. Remittance has an unavoidable share in the GDP of a country because the influence can be seen in various areas of the economic system.
- Funds sent by foreign workers help poor families to fulfill their everyday needs.
- These funds enable families to participate in the economy by purchasing goods and services. It increases the consumption side of the GDP.
- More foreign funds coming into the economy is a healthy sign of economic growth. These foreign finds help the state to increase the foreign reserves which are held by the central banks. These reserves can be used for several international purposes.
- When the foreign reserves of a country rise, the trading ability of the country increases.
- Due to improved performance of the country in international trade, the value of domestic currency increases which ensures further development for the country.