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3. Why is the cost of remittances the subject of such intense international scrutiny?


3. Why is the cost of remittances the subject of such intense international scrutiny?

Solutions

Expert Solution

Balance of Payments refer to the Current Account and Capital Account transactions of the country with the rest of the world.

Remittances are generally the funds sent by foreign workers to their home countries to their families. As it is revenue in nature, it belongs to the current account transactions of the Balance of Payments.

Now, these transactions have cost levied on them like the charges to transfer funds from one country to another and also the charges for the conversion of foreign exchange. Also there are other brokerage charges.

Now-a-days, these transactions are being done in illegal modes as well which leads to money laundering, at it in turn affects the balance of payments for the respective countries.

Therefore, to kep a check on the cost of such remittances is subject of such intense international scrutiny, because we have to completely check that there is no illegal transfer of funds being done, which might lead to loss of the countries resources and revenue.


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