World Bank predicts sharpest decline of remittances in recent history

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REMITTANCES to sub-Saharan Africa registered a small decline of 0.5 percent to $48bn in 2019. Due to the Covid-19 crisis, remittance flows to the region are expected to decline by 23.1 percent to reach $37bn in 2020, while a recovery of 4 percent is expected in 2021, says a World Bank report released on Wednesday.

‘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. 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,’ the report said.

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.

Studies show that remittances alleviate poverty in lower- and middle-income countries, 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 solve food shortages and immediate livelihoods 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,’ said World Bank 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.’

Remittance costs

Sending $200 remittances to the region cost 8.9 percent on average in the first quarter of 2020, a modest decrease compared with the average cost of 9.25 percent a year before. 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 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.

‘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.

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