Engineering News

Global remittances are projected to decline sharply by about 20% this year owing to the economic crisis induced by the Covid-19 pandemic and shutdown, the World Bank reports.

The projected fall, which will be the sharpest decline in recent history, is largely the result of a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.

Remittances to low- and middle-income countries (LMICs) are projected to fall by 19.7% to $445-billion, representing a loss of a crucial financing lifeline for many vulnerable households.  

Studies show that remittances alleviate poverty in LMICs, improve nutritional outcomes, are associated with higher spending on education and reduce child labour in disadvantaged households.

A fall in remittances affects families’ ability to spend on these areas as more of their finances will be directed to solving food shortages and immediate livelihood needs.

“Remittances are a vital source of income for developing countries. The ongoing economic recession caused by Covid-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies.

"Remittances help families afford food, healthcare and basic needs. As the World Bank group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs,” says World Bank president David Malpass. 

The World Bank is assisting member States in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows.

It is working with the Group of 20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.

SUB-SAHARAN AFRICA

Remittances to sub-Saharan Africa registered a small decline of 0.5% to $48-billion in 2019, but as a result of the Covid-19 crisis, remittance flows to the region are expected to decline by 23.1% to $37-billion this year.

The World Bank does, however, expect a recovery of 4% in 2021.

The anticipated decline in remittances this year can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where African migrants reside including in the European Union, the US, the Middle East and China.

These large economies host a large share of sub-Saharan African migrants and, combined, are a source of close to a quarter of total remittances sent to the region.

Further to the pandemic’s impact, many countries in the East Africa region are experiencing a severe outbreak of desert locusts attacking crops and threatening the food supply for people in the region.

In terms of remittance costs, sending $200 remittances to the region cost 7.8% on average in the first quarter of this year, a modest decrease compared with the average cost of 9.25% a year before.

The most expensive corridors are observed mainly in Southern African, with costs as high as 20%. At the others end of the spectrum, the less expensive corridors had average costs of less than 3.6%.