COVID-19: As global remittances decline by 20% to $445bn, over 800 million rural family members face deeper poverty

…Africans to bear the greatest brunt

Ben Eguzozie, with agency report

At least 800 million rural family members around the world are at risk of being pushed deeper into poverty, with lack of access to food, health and education, as the economic impact of the COVID-19 pandemic has led to the loss of millions of jobs in the developed and developing world, a World Bank survey says.  This would threaten global prosperity and stability, the global lender says.

This is as a result of the sharpest decline in history of remittances made by migrant workers who live and work in developed and developing world, and make remittances to support their families back home.

The migrant workers, mainly Africans, Asians, the Americas and Eastern Europeans living mostly in the developed world, are among the most directly affected by the job loss.  They work in economic sectors adversely impacted by the economic slowdown such as construction, the hospitality industry, tourism, food, agribusinesses, transport and domestic work. This loss of income has ripple effects across the world, putting millions of poor rural families at risk, the report says.

The majority of the migrant workers who are from low and middle-income countries, need to support their families back home through the remittances they send home on a regular basis. It is estimated that the world’s 200 million migrant workers send money regularly to 800 million family members to help them access food, health and education. Therefore, one in nine people in the world are directly impacted by remittance flows.

The World Bank said in a recent forecast indicated that, in 2019, remittances to low and middle-income countries totalled $554 billion, with about half reaching families living in small towns and rural villages. However, as a result of COVID-19, these flows are projected to make their sharpest decline in history, falling by 20 percent in 2020 to $445 billion.

Although in the past, remittances have been relatively resilient to external shocks, COVID-19 is different. It impacts both the senders and recipients simultaneously. Families living in rural areas in developing countries have been severely affected by lockdowns and social distancing. Markets have closed and transport has been disrupted. Small-scale farmers have been unable to sell their produce or to buy inputs, such as seeds or fertilizer. Daily labourers, small businesses and informal workers, who are often women and young people, are among the worst affected.

By far, analysts believe that Africa, with over 1.3 billion people majority of who live in poverty, would clearly be the hardest-hit in deeper poverty in the coming months.

Meanwhile, the UN’s International Fund for Agricultural Development (IFAD) is currently tracking the impact of declining remittances on the ‘receiving end’ in developing countries, where typical remittances of $200 to $300 per month on average account for 60 percent of household income. While the reduction in remittances will not fall evenly across countries and communities, the impact is likely be substantial in rural areas where remittances count the most.

Initial indications from countries that rely heavily on remittances are deeply concerning. Reports ranging from Senegal, Kenya, El Salvador and Nepal to the Philippines and Eastern Europe confirm not only the significant drop in remittances, but also the return home of hundreds of thousands of jobless migrant workers to their strained households and communities in rural areas.

The sudden reduction or outright halt in remittance flows could also impact food production in the coming months with the planting season starting in different regions. In Mali, for example, many families in rural areas often cannot buy seeds and inputs for the next agricultural season without regular remittances.