Marketplace All-in-One A small tax with high costs
Mar 26, 2026
Nara Sreetaran, a research analyst at AidData who studies remittances and transaction costs, and Jane Foley, head of FX strategy at Rabobank who tracks currency moves, dive into the impact of a new 1% remittance tax. They discuss how the dollar’s strength shapes global flows. Short, sharp takes on who pays more, shifting transfer methods, and broader liquidity and market reactions.
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Dollar Strength Comes From Liquidity And Safe Haven Status
- The U.S. dollar is acting as the global safe haven and is strengthening amid geopolitical uncertainty.
- Jane Foley explains this is driven by liquidity needs and the dollar's central role in supply chains and payment systems, so investors seek dollars to transact.
Money Moves To Short-Term Liquidity Not Long Bonds
- Investors are parking cash in short-term money-market assets rather than long-duration bonds during risk episodes.
- Jane Foley notes liquidity preference pushes flows to the shorter end so people can exit quickly if needed.
A 1% Remittance Tax Raises Total Costs By About 17 Percent
- The new 1% remittance tax raises total cash transfer costs significantly because it stacks on existing fees.
- Nara Sreetaran cites World Bank data showing average costs of 5.8% would rise to about 6.8%, a ~17% increase in total price.