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Covid-19 pandemic hits global remittances

by Staff reporter
30 Apr 2020 at 11:45hrs | Views
THE World Bank has projected a sharp decline in global remittances by 20% in 2020 due to the economic crisis induced by the Covid-19 pandemic and Zimbabwe will not be spared.

The projected fall, which would be the sharpest decline in recent history, is largely due to the loss of earnings by migrant workers, who tend to be more vulnerable to shifts in employment and wages during an economic crisis in a host country, according to the international financial institution.

This comes amid measures recently introduced by the South African government for business establishments in that country to ensure a new labour market which prioritises South Africans is built in the postCovid-19 era.

This will see a bulk of Zimbabweans employed in the hospitality sector in South Africa losing their jobs in the coming weeks.

"Sub-Saharan migrants are losing their jobs due to an almost complete shutdown of economic activities — especially in the construction, hospitality, and other service sectors — remittances are expected to decline in the coming months," a brief on migration and development by the World Bank states.

"Due to the Covid-19 crisis, remittances are expected to decline by 23,1% in 2020 to reach US$37 billion, while a recovery of 4% is expected in 2021. "Remittances to low and middle-income countries (LMICs) are projected to fall by 19,7% to US$445 billion, representing a loss of a crucial financing lifeline for many vulnerable households."

Zimbabwe was among the top remittance recipients in Sub-Saharan Africa in 2019, earning US$1,7 billion, according to Work Bank and International Monetary Fund statistics.

The remittances amounted to 13,5% of gross domestic product.

"Studies show that remittances alleviate poverty in lower and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households," the World Bank said in a news release.

"A fall in remittances affects families' ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihood needs. Remittances are a vital source of income for developing countries. The ongoing economic recession caused by Covid-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies," World Bank Group president David Malpass said.

The World Bank said it was assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows.

"In the past, remittances have been counter-cyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties," the brief reads.

According to the institution's statistics, the global average cost of sending US$200 remains high at 6,8% in the first quarter of 2020, only slightly below the previous year.

Sub-Saharan Africa continued to have the highest average cost, at about 9%, yet intra-regional migrants in Sub-Saharan Africa comprise more than two-thirds of all international migration from the region.

"Quick actions that make it easier to send and receive remittances can provide much-needed support to the lives of migrants and their families. These include treating remittance services as essential and making them more accessible to migrants," lead author of the brief and head of Global Knowledge Partnership on Migration and Development, Dilip Ratha, said.

Source - the independent