World Bank Predicts Sharpest Decline of Remittances to Africa
ADDIS ABEBA – Africa remittances are projected to decline sharply by 21. 7 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown.
The decline 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, claims a new World Bank Report.
The 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, due to the virus. Last year, the region registered a $48 billion in 2019.
The anticipated decline can be attributed to a combination of factors.
It would, however, mainly be 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, says the report.
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 contends the decline in remittance represents a loss of a crucial financing lifeline for many vulnerable households not only in Africa but also in other developing countries.
“Remittances are a vital source of income for developing countries,” said World Bank Group President David 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,” the presidnet 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.
Sending $200 to countries in this sub region now costs 8.9 percent on average in the first quarter of 2020. This has shown a modest decrease compared with the average cost of 9.25 percent a year before, the report says.
The most expensive corridors are observed mainly in the Southern African region, with costs as high as 20 percent.
At the other end of the spectrum, the less expensive corridors had average costs of less than 3.6 percent.
The World Bank says it 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.
The bank is also working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor, according to its officials.
“Quick actions that make it easier to send and receive remittances can provide much-needed support to the lives of migrants and their families. These include treating remittance services as essential and making them more accessible to migrants,” said Dilip Ratha, lead author of the report.
Globally, remittances are projected to decline by about 20 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown. The projected fall would be the sharpest decline in recent history.
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