SEATTLE, Washington — According to the World Bank, global remittances, the money sent home from migrant workers to their home countries, are predicted to decline by about 20% in 2020. This sharp drop is due to the economic shutdown brought about by the COVID-19 pandemic. During economic crises, migrant workers are more vulnerable to loss of employment as well as wage cuts. These two factors play a large role in the decline of remittances during COVID-19.
Why Remittances Matter
Migrant workers sending money to their home countries provide crucial financing for their families in lower-income countries to afford food, healthcare and basic needs. In 2019, there were approximately 200 million migrant workers providing essential services to important economic sectors in more than 40 high-income countries and sending money to support roughly 800 million relatives in more than 125 home countries. According to data from 2019, the World Bank reported that remittances equaled or surpassed 25% of the GDP of Tonga, Kyrgyz Republic, Tajikistan, Haiti and Nepal. Studies show that remittances are an effective way of alleviating poverty in developing countries and the United Nations has acknowledged the importance of remittances in global development and achieving the Sustainable Development Goals. The need for these remittances is necessary now more than ever since developing countries have been most impacted by the COVID-19 pandemic.
The International Monetary Fund (IMF) is calling for a collaborative response from the global community to help lessen the impact of the decline in remittances during COVID-19. Part of this response entails recognizing the benefits of keeping migrants in their host countries as far as is possible and encouraging help from donor countries and international finance institutions to assist migrant-source countries with the pandemic and the economic shock of losing remittance flows. The decline in remittances means that recipient countries will lose a vital source of income during a time that it is needed most. As such, the safeguarding of remittances is crucial during the COVID-19 pandemic.
A Call to Action
The IMF details three key actions that must be taken to address the decline of remittances during COVID-19. First, host countries must extend relief packages for employment protection to migrant workers so that they can remain employed and taken care of. Second, the home countries that will be receiving returning migrants must receive help to mitigate the spread of infection through enhanced testing and quarantine efforts. If this step is ignored, returning migrants will put further stress on already struggling health care systems and more economic damage will be caused on top of the decline in remittances. Finally, international finance institutions must assist the governments of poor countries with people most reliant on remittances, through social insurance programs and reduced remittance costs.
Other Countries Respond
The U.K. and Switzerland have already responded to the call to action, asking for other countries to band together to protect remittances during the pandemic. The U.K. and Switzerland urge countries to declare remittances “an essential financial service” and to support greater access to digital remittance services. Additionally, remittance service providers are being asked to reduce costs and fees for people making payments to their home countries. With these actions, it is hoped that the lifeline that is remittances, will continue to reach those reliant on the support. International Secretary of Development in the U.K., Anne-Marie Trevelyn, says that making it easier for migrant workers to transfer money home equates to “helping to prevent fragile economies from facing potential collapse during the pandemic.
The call for action by the U.K. and Switzerland was backed by partners, including the World Bank, the U.N. Capital Development Fund and the U.N. Development Programme. A number of countries have already joined, including Ecuador, Egypt, El Salvador, Jamaica, Mexico, Nigeria and Pakistan. The decline of remittances during COVID-19 has severe economic consequences for people all over the world. Through global action protecting remittances, people in developing countries can be protected from falling into deeper poverty and fragile economies can be saved.
– Giulia Silver