MONEY sent home by economic immigrants to support their families dwarfs the West’s official aid budgets, a report showed yesterday.

Migrants around the world sent home $167 billion (£97 billion) last year, with £2.7 billion of that coming from immigrants and minority communities in Britain. The amount worldwide has grown so quickly that it is now more than twice the size of the world’s development spending, the World Bank revealed.

Calling migration “a powerful force for poverty reduction”, the World Bank said that flows of so-called remittances from overseas workers to developing countries will reach a record $167 billion in 2005, from $31 billion in 1990. The money comes from an estimated 200 million people now living in countries where they were not born. Remittances are generally put towards food and clothing, children’s education, medical expenses and housing.

The Department for International Development (DfID) said that India was the biggest recipient of this informal aid from Britain, although precise figures can be difficult to find. Estimates of the amount people working in Britain send back to India each year range from £96 million to £669 million. The DfID this week established a task force to help to cut the costs of sending money abroad, and set up a website (www.sendmoneyhome.org) to advise on cost-efficient ways to transfer funds.

Gareth Thomas, the International Development Minister, said: “Remittances are hugely important for people on low incomes in developing countries . . . this money plays a huge role in promoting international development and fighting poverty.”

The global surge in remittances stands in contrast with slower growth in overseas aid. In 1995, developing countries sent $59 billion in aid and workers sent home the same amount. But by last year, the World Bank said, aid had risen to $79 billion while remittances had grown to $160 billion. In the UK, official aid still remains larger than remittances, with a budget of £3.8 billion.

India, China and Mexico received the most in remittances, with migrants expected to send about $20 billion to each this year. In Tonga, the South Pacific archipelago, remittances account for 31 per cent of GDP.

The bank also said that extreme poverty was on track to be cut by half within a decade.

In its annual Global Economic Prospects report, the world body said that the proportion of people earning less than $1 a day would drop from 21 per cent in 2002 to 10 per cent in 2015. In real terms, that meant that those in extreme poverty would fall from just over 1 billion people three years ago to 617 million in a decade.

Extreme poverty was set to be “almost eliminated” in East Asia, the Pacific region, Europe and Central Asia by that date, it said, thanks to rapid economic growth as a result of improved macroeconomic policies, lower inflation, trade liberalisation, privatisation and regulatory reform. However, the report said that there was no room for complacency: extreme poverty was set to increase in sub-Saharan Africa and worldwide nearly 2 billion people would still be living on less than $2 a day by 2015. Migration boosts the output of both developed and developing countries by enabling workers to move to locations where they were more productive and earn higher wages, the report claimed.

But it was concerned that between a quarter and a half of university-educated people from small and medium-size developing countries live in the 30 member states of the OECD, the organisation of developed nations. In the case of Jamaica and Haiti, the proportion is more than 80 per cent .François Bourguignon, the World Bank’s chief economist, said: “Migrants’ productivity and earnings are a powerful force for poverty reduction. Remittances, in particular, are an important way out of extreme poverty for a large number.”

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