According to the World Bank, remittance flows to Sub Saharan African countries will drop by 23.1% from $48 billion in 2019 to $37 billion in 2020 in the wake of the Covid-19 economic crisis.
This is unlike the last decade where a strong growth of remittances was driven by stronger growth in the United States, the Middle East and Asia. In 2019, the top remittance recipients globally were India with $79 billion, followed by China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion), and Egypt ($29 billion) among other countries.
In COMESA region, the leading recipients of remittances in 2019 were Egypt (US$ 26,791 million), Kenya (US$ 2,819 million), Tunisia (US$ 1,912 million), DR Congo (US 1,823 million) and Zimbabwe (US$ 1,730). In terms of contribution of remittances to GDP, Zimbabwe leads with 13.5%, Comoros (11.5%) and Egypt (8.2%).
o far, the wealthiest countries including the United States, France, United Kingdom, Italy and China, who account for up to a quarter of all funds remitted to African countries were some of the worst-hit by the pandemic.
Migrants in the diaspora have lost jobs and taken pay-cuts amidst the coronavirus outbreak and subsequent lockdown leading to the drastic fall in remittances. Thus, many countries have suffered a double hit by the crisis more so those that remittances constitute a significant share of the GDPs.
Diaspora remittances are a key source of investments and enabler of economic growth and sustainable development. They have multiplier effects in the economy through savings, investments, fiscal and debt sustainability.
By increasing the consumer base, remittances expand the revenue base and allow the government to carry more debt or incur more expenditures. At household levels, remittances support the start‑up of small‑scale enterprises, while increased household consumption inspired by remittances increases the demand for locally produced goods and services.
In addition, remittances are a vital source of income for health and nutrition, education opportunities, improved housing and sanitation, entrepreneurship, financial inclusion and reduced inequality.
The World Bank estimates that foreign direct investment will drop by around 35% due to travel restrictions, disruption of international trade and decline in the stock prices of multinationals. Thus, diaspora remittances will remain crucial to many countries in the region.
The United Nations SDG goal No. 10 seeks to reduce remittance costs to less than 3% and to eliminate remittance corridors with costs higher than 5% by 2030. The purpose is to create a convergence between the goals of remittance families, government development objectives, private sector strategies to tap underserved markets.