WASHINGTON/LONDON (Reuters) – The coronavirus pandemic and its devastating economic impact on developing countries could fuel fresh interest in so-called diaspora bonds that allow migrants to support their countries of origin, experts from the World Bank and other groups say.
Dilip Ratha, the World Bank’s lead economist on migration and remittances, told Reuters that diaspora bonds could generate about $50 billion (40 billion pounds) a year in total for developing countries, potentially helping to offset a sharp drop in foreign direct investment that is slated to fall by 37% this year.
However, such claims have met with scepticism in some quarters, given the plight of many migrants who have lost jobs and income during the crisis and as direct transfers of wages to their home countries – known as global remittances – decline sharply.
For an interactive version of a chart on remittance flows to low and middle-income nations, click here: reut.rs/3asg9qh.
World Bank officials on Friday warned that developing economies could suffer close to a 3% decline in economic output if consumption and investment do not rebound quickly after the coronavirus pandemic.
Ratha said the World Bank has previously worked with Nigeria and India on diaspora bond issues and that other countries have expressed interest in recent months as they scramble for resources to fight the virus and mitigate its impact.
Jay Benson, a senior researcher with the One Earth Future Foundation in Denver, Colorado, said potential issuers with large diasporan populations included Ethiopia, Somalia, Kenya, Liberia and the Democratic Republic of Congo.
Ratha said diasporan investors were typically less skittish than outside investors.
“They have a connection to a country and have a vested interest, as they might return,” he said, noting that migrants also often had greater access to land and assets.