One of the people who is on the receiving end of these so-called remittances is Mohsen*, who lives between Hammamet and Tunis. Mohsen can’t work since the day that he was left disabled after an accident that he had when he still lived in France.

Mohsen returned to Tunisia 30 years ago and does not receive any financial help from the state. Because of this, his only source of income is the roughly 790 Dinar that his siblings - who live in France and Canada - send him every month. “I don’t like the fact that they send me money, but I don’t have any other choice”, he says, adding that he would not be able to survive without the help of his siblings.

Not everyone who receives financial support from relatives abroad is in as difficult a situation as Mohsen. Abir*, for example, is 40 years old and works as a researcher in Romania. Around three to four times a year she sends money to her mum who is still living in Tunisia - usually for special occasions like her mum’s birthday or New Year’s, but also in times where her mum has extra costs, like the start of the school year or for medical consultations.

“We are six children in the family and I am the only one who finished her studies and is working”, Abir says, whose mum receives a small pension. “When I work and when I have money to spare, I want to make my mum happy, I want to help her, so I send it to her. After all the years of sacrifices, it is my responsibility to give something back”.

For some people, like Mohsen for example, remittances serve as a sort of lifeline in times of crisis or when they are unemployed. Afrobarometer data suggests that around two percent of households in Tunisia are very dependent and another 14 percent of households are a bit or somewhat dependent on remittances.

Sending money home, however, comes with its costs. When Abir goes to the money transfer provider of her choice, she has to pay a commision of around ten percent to transfer the money to her mum. “Last time for example I paid 80 Ley (editor’s note: around 55 Tunisian Dinar), it really is so expensive”, she says. 

The average transaction cost of sending money to Tunisia is 8,7 percent, according to the World Bank. Because of that, many people send money through informal channels in the form of tangible items or cash. This in turn means that the official data does not show all the remittances that flow into Tunisia - even though it still shows the importance of this money for the country.

A stable source of foreign currency

In the past years, remittances to Tunisia kept rising: At the end of October 2022, they reached 7,15 billion Dinar - which is 13,5% more than in the same period of time in 2021. While the tourism industry is regularly named as an important source of foreign currencies, remittance inflows make up more than double the tourism revenue earned during the first ten months of 2022.

Remittances have been higher than both tourism receipts and foreign direct investment for the past ten years, which makes them one of the main sources of foreign currency for Tunisia. 

Already in 2021, the remittances were 28 percent higher than in 2020, accounting for 4,7 percent of the GDP of Tunisia. And with more and more people leaving the country, remittances are expected to grow even further in the future.

Foreign currency is important for a country, because it is used to pay for imported goods and foreign debt. “All countries in the world - and Tunisia is no exception - are dependent on other countries in terms of imports. For this reason, to pay for imports, a country needs foreign currencies like for example Dollar, Yen or Euros”, says Refk Selmi, Associate Professor of Finance and Data Science. Tunisia receives these foreign currencies mainly through remittances. And through that, Tunisian migrants also indirectly help stabilize the Dinar, says Refk Selmi: “If there are not sufficient reserves in foreign currencies, this would have a negative impact on the national currency”.

Remittances are not only higher, but also more stable and reliable than other forms of foreign currency like tourism receipts and foreign direct investment. For example, the 2015 terrorist attacks and the aftermath of the Covid-19 pandemic damaged the tourism sector.

In addition to that, foreign direct investment inflows into the country have decreased in the past ten years. Even in the upcoming years, they are expected to “not rebound strongly without greater political stability and economic reform, neither of which is likely in the short term”, as the Economist Intelligence Group writes in one of their analyses. Remittances are therefore also less dependent on changes in the priorities and financial situation of official aid donors.

Less poverty, better health and education

Looking at the impacts of remittances on a country but also the individual recipient households, studies across the world have shown that they reduce poverty and stimulate spending on health and education. For recipient households, remittances also act as a form of insurance against financial shocks by diversifying the sources of income. 

While the migration of highly qualified people like doctors and engineers can lead to brain drain, remittances can help support brain gain. The reason for this is that if migrants are highly qualified, they earn more in their host countries and thus they can send more money to their families. This in return results in higher investments in the education of household members. Through that, the migration of highly qualified people can contribute to an improvement in the education level of household members in the home country.

At the country level, remittances can have an indirect positive impact on the labor market. Hajer Habib, a Research Assistant at El Manar University in Tunis, writes in one of her papers: “An increase in consumption and investment as a result of remittances can stimulate domestic production leading to higher employment among households that do not benefit from remittances”.

How remittances impact a country and its economy also depends - to a large part - on what they are spent on. “Remittances in Tunisia are used more in terms of consumption than for investment purposes”, says Refk Selmi, who has researched this topic. She adds that Tunisians living abroad are afraid to invest in Tunisia, “because today there is an increasing political uncertainty that may discourage investments, as investors evidently dislike uncertainty. So, I believe that there is a need to improve the trust towards the government and its capability to reduce the current political and economic uncertainties.”  

This can be seen in recent Afrobarometer data, according to which more than 80 percent of Tunisians think that their government is handling the creation of jobs very or fairly badly and nearly 70 percent think that their government is handling the fight against corruption within the government very or fairly badly.

Because remittances in Tunisia are largely used for consumption purposes, they tend to react to high inflation rates. “When there is inflation, the living costs increase, so the families who live in Tunisia ask their relatives abroad for more money”, explains Farid Makhlouf, Associate Professor of Economics and Statistics. He also adds that remittances could theoretically impact inflation as well, even though this has not been proven for the Tunisian situation: “When there are more remittances, money supply goes up. When people have more money, the demand for products goes up. When the demand goes up, there is less supply”. Less supply in turn can lead to higher prices - also called: inflation.

In times of crisis, remittances increase

“Unlike private money, which tends to leave the country at the first sign of trouble, remittances increase when the family back home is in trouble, when the family needs the money. Even when migrants are facing difficulties in the country where they are, they will try to maintain family remittances by skipping meals or sharing accommodation. Remittances are Dollars wrapped with love”, said Dilip Ratha, the Manager of the Migration and Remittances department of the World Bank, during a TED talk in 2016. 

With this statement, he is describing one of the most important characteristics of remittances: their countercyclicality. Or to put it more simply: in times of crisis, remittances increase.

This was for example the case after 2011. Farid Makhlouf has researched the remittance behavior of Tunisian migrants after the revolution. 

“What we found is that Tunisians abroad got more involved, they sent more money. Because the revolution generated some economic difficulties, which pushed Tunisians living abroad to help their families more”, he says. 

Another reason for this increase in remittances was - according to Makhlouf’s research - the hope of Tunisians abroad for an improvement of the situation in their home country after the revolution.

Even during the COVID-19 pandemic, remittances to Tunisia have increased - despite the fact that not only Tunisia, but also the host countries of Tunisian migrants were hit by the crisis. According to Farid Makhlouf, this can be explained by several factors, such as the diversification of the countries of residence. “Most Tunisian migrants are living in Europe and in the Gulf countries. This diversification can also help to keep remittances stable”, he says. Moreover, during the pandemic, the social security system of the host country provided aid to the inhabitants. “If the government helps migrants, they can continue to send money.”

Sometimes, remittances still decline in times of crisis, but in those cases they tend to recover relatively quickly. “During the financial crisis in 2007, there was a negative growth rate of remittances, but just for one year. Then the remittances returned to the normal amount”, says Farid Makhlouf. “In conclusion we can say: remittances are resilient.”

Just like the remittances that are sent to Tunisia, the remittances that people in Tunisia send to other countries have also increased in recent years - despite them being much lower than the inflowing remittances. Data published by the Pew Research Center indicates that outflowing remittances consist of money sent by migrants from other Maghreb or sub-Saharan African countries to their families in their home countries, and of money sent by Tunisians living in Tunisia to support their relatives who are living and/or studying abroad.

Increasing the impact

Despite the high amounts of money that Tunisians who live abroad send home every year, a big part of it does not reach its destination. If the transaction costs for remittances would be reduced, the positive effects of remittances would increase. Through that, more money would reach Tunisia and more people would be encouraged to send remittances through formal channels. That in turn would further increase the positive impact of this money. “When a large amount of remittances is sent formally, this means that the reserves of the Central Bank will increase. With these reserves, imports and debts can be paid”, says Refk Selmi.

Inkyfada asked the Central Bank about what they are doing or planning on doing to address the high transaction costs, but several requests were left unanswered.

To decrease these costs, the African Development Bank launched the Migration and Development Trust - one of whose goals was to reduce the costs of sending remittances to African countries. For the case of Tunisia, this and other initiatives seem to not have been successful, since the average transaction cost has remained more or less stable in the past ten years. The AfDB did not respond to requests from inkyfada, asking about the achievements of this project. 

According to Refk Selmi, the positive impact of remittances on the Tunisian economy could be further increased if they were not only used for consumption purposes but also for investments. “Tunisians who live abroad want to contribute to their country. Because of that, it is very important to encourage them to invest into Tunisia, and in order to encourage them it is important to make administrative procedures easier”, she says, adding that in times of political uncertainty it is especially hard to convince people to invest. 

Refk Selmi also suggests that the Tunisian authorities should introduce other regulations to help strengthen the involvement of Tunisians abroad in the national development process, like for example opening different economic sectors to competition and developing a fair administrative business environment.