The COVID-19 crisis is severely affecting migrants’ ability to send money home to their families.
The World Bank predicts a decline in global remittances by about 20 percent in 2020 due to the economic downturn caused by the COVID-19 pandemic. This decline threatens the livelihoods of millions of households in developing countries, and the international community must urgently invest in innovative, resilient, and cost-reducing solutions to support developing countries amid the crisis and in their recovery.
Impact of COVID-19 on remittances
Remittances serve as an important source of income for millions of households in developing countries and act as a safety net in times of emergencies, natural disasters and crises. In 2019, the flow of remittances reached a record flow of $554 billion to low-and middle-income countries.
As COVID-19 continues to affect the global economy, remittances become more important than ever before to prevent large-scale poverty and starvation. However, a drop in migrants’ wages and employment, fall in tourism, and restrictions on the movement of people, goods and services will likely cause remittances to decline this year.
The travel restrictions in countries like Malaysia, Saudi Arabia, Qatar, United Arab Emirates (UAE) and Kuwait threaten to leave millions of South Asian migrant labourers without work. The economic slowdown and lockdown in the United States is likely to have tremendous impacts on Central and Latin American countries. Job losses in Europe and North America will affect the flow of remittances to Africa and result in massive reduction in disposable incomes. In countries like Haiti, South Sudan and Liberia where remittances account for 37.1%, 34.4% and 9.4% of GDP in 2019 respectively, the decline in the flow of remittances during and after the COVID-19 crisis will severely hit their livelihoods.
Reducing costs to save livelihoods
To protect the livelihoods of migrants and their families, it is crucial for the international community to fulfil their commitments to reduce the cost of remittances. The global average cost for sending $200 to low and middle-income countries is 6.9 percent — almost 4 percent higher than the 3 percent commitment under SDG 10 C. The United Nations Secretary General recently called for countries to take a step further and get the cost as close to zero as possible. Amid the crisis, the costs of remittances could increase due to lockdowns, closure of agents and reduced working hours of brick-and-mortar remittance service providers.