Remittances in the time of pandemic

A cross the world, the most severe impact of the Covid-19 pandemic has been observed on livelihoods. During such economic downturns, historically, migrant workers get disproportionately affected. Migrants, even if not unemployed, face reduced pay, or worsened working conditions. Often xenophobic violence deepens such crisis. Being excluded from the social safety nets create additional miseries. Taking into account all such concerns, the World Bank, IMF and the Asian Development Bank (ADB) predicted that remittance outflows to the low and lower-middle-income countries might fall 20 per cent or more in 2020. According to the ADB, countries from South Asia, such as Bangladesh, Nepal, Pakistan could be the worst affected countries in the world with a fall in remittances by 26 per cent or more.

Remittance inflow to South Asian countries indeed fell during the peak of the global pandemic. For instance, total remittances received in March, April and May in Bangladesh were 12.5 per cent, 23.8 per cent and 13.9 per cent lower than the same periods the previous year (Figure 1). For the same period, the growth rate in remittances for Nepal and Pakistan was: Nepal (March: 2.3 per cent, April: -56.7 per cent, May: -38.2 per cent); and Pakistan (March: 9.9 per cent, April: 0.8 per cent, May -19 per cent). However, in contrast to the projections, such negative trends reversed in June and July 2020 for all these countries. In June, remittance receipt in Bangladesh increased by 34 per cent, while this rate was 9.4 per cent for Nepal, and 51.2 per cent for Pakistan. The trend continued for these countries in July and August: Bangladesh (July: 62.6 per cent; August: 35.9 per cent), Nepal (July: 22.2 per cent), Pakistan (July: 36.5 per cent; August: 24.4 per cent). A similar trend has been observed for other major remittance-receiving countries such as the Philippines.
here are a couple of reasons behind such observed trends. The fall in remittances in the April-May is the direct result of strict measures taken in the destination countries closing businesses and restricting movements. For Bangladesh and Pakistan, the rise in remittances in the months of May-July 2020 could be partly due to the Eid festivities – as it has been the case in the earlier years. Remittance to the country usually peaks up in the Eid month or immediate previous month of the Eid (Figure 2). Also, remittance is usually counter-cyclical: people remit more during economic hardships back at home. However, this might seem puzzling as the COVID-19 pandemic has affected all countries alike, and therefore the workers in the destination countries are also in woes.

We observe a systematic pattern for Bangladesh (Figure 3 and Figure 4). The remittance inflow to Bangladesh started declining from December 2019 due to the falling oil prices. Between December’19-April’20, the oil price nosedived from $67.2 to $18.4 per barrel. Consequently, remittance growth from GCC countries (except Saudi Arabia) remained negative for the first five months of 2020 on year-on-year basis. For the non-GCC countries, remittance receipt saw a large dip in March-May 2020. The only two countries for which remittance growth remained positive throughout the time are the USA and Saudi Arabia. On year-on-year basis, remittances from the USA to Bangladesh was 35.5 per cent higher in May and 60 per cent higher in June. Similar growth in remittances from the USA is observed for the Philippines, and countries in Central America (Mexico, Nicaragua, Honduras) etc. To some extent, the flow from the US might be a result of the federal unemployment benefits package undertaken by the US government.
Continue reading at: The Financial Express

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