Remittances as a macroeconomic pillar

Among the largest sources of foreign currency entering Ukraine over the last two decades are remittances: money sent home by citizens working abroad, mostly in Europe.

Why they matter macroeconomically

Because they are enormous relative to other inflows and because they are stable. Foreign direct investment collapses in a crisis. Portfolio flows reverse violently. Remittances do neither, and often rise during a domestic crisis, because the person abroad sends more precisely when the family at home needs more.

That counter-cyclical behaviour makes them the most reliable component of the current account.

How they are spent

Overwhelmingly on consumption: food, utilities, education, medical care and house repairs. A smaller share is saved or invested, usually in property.

That distribution is often criticised as unproductive. I think the criticism misses the point. Money spent on a child's education or a repaired roof is not consumption in any meaningful economic sense; it is household investment with a long return.

The costs

They are real and rarely counted. Remittances are the financial trace of families living apart, of children raised by grandparents, and of skilled people doing unskilled work abroad. A remittance-dependent economy is exporting its labour force and importing the proceeds.

What follows for policy

Reduce transfer costs, which are a straight deduction from a household's income. Create instruments that let a returning worker invest at home. And understand that the eventual objective is fewer remittances, not more — because that would mean the people sending them came back.

I can see where this money goes from my retail customers' orders: building materials, home repairs, small equipment. It goes into resilience rather than investment, and it is the steadiest source of demand I see outside the cities. The macroeconomic problem is that the flow never becomes capital — but from the household's point of view that was never its purpose.