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World Bank projects depressed global remittances due to crisis

A statement from the World Bank also projected that due to the COVID-19 crisis, remittance flows to the region are expected to decline by 23.1 percent to reach $37 billion in 2020, while a recovery of 4 percent is expected in 2021.

World Bank has projected depressed global remittances by about 20 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown.

The projected fall, which would be the sharpest decline in recent history, is largely due to 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 percent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.

Remittances to Sub-Saharan Africa reported a small decline of 0.5 percent to $48 billion in 2019.

A statement from World Bank also projected that due to the COVID-19 crisis, remittance flows to the region are expected to decline by 23.1 percent to reach $37 billion in 2020, while a recovery of 4 percent is expected in 2021.

“The anticipated decline can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where African migrants reside including in the EU area, the United States, the Middle East and China,” said the World Bank in a statement adding that 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.

World Bank Group President David Malpass 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,” said Mr Malpass.

“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,” he added.

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

According to a warning statement by Food and Agriculture Organization (FAO), East Africa is a region beset by climate- and conflict-related shocks. Millions of people are already acutely food insecure. Now they face another major hunger threat in the form of desert locusts.

The locust upsurge affecting East Africa is a graphic and shocking reminder of this region’s vulnerability. This is a scourge of biblical proportions. Yet as ancient as this scourge is, its scale today is unprecedented in modern times.

On 20th of January this year, FAO called for $76 million to help combat this pest crisis. But the resources to control the outbreak have been too slow in coming.

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 G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.

World Bank estimates that in 2021, remittances to LMICs will recover and rise by 5.6 percent to $470 billion.

“The outlook for remittance remains as uncertain as the impact of COVID-19 on the outlook for global growth and on the measures to restrain the spread of the disease. In the past, remittances have been counter-cyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties,” the statement reads.

“Effective social protection systems are crucial to safeguarding the poor and vulnerable during this crisis in both developing countries as well as advanced countries. In host countries, social protection interventions should also support migrant populations,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.

Source: The Exchange

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