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Remittances to sub-Saharan Africa drop by 12.5% ‘due to 27.7% fall in Nigeria remittances’ – WB

Remittances to Sub-Saharan Africa declined by an estimated 12.5 per cent in 2020 to $42 billion, the World Bank has said.

The decline was “almost entirely due to a 27.7 per cent decline in remittance flows to Nigeria, which alone accounted for over 40 per cent of remittance flows to the region”’, the Bretton Woods institution said.

Excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3 per cent.

Remittance growth was reported in Zambia (37 per cent), Mozambique (16 per cent), Kenya (9 per cent) and Ghana (5 per cent).

In 2021, remittance flows to the region are “projected to rise by 2.6 per cent, supported by improving prospects for growth in high-income countries. Data on remittance flows to Sub-Saharan Africa are sparse and of uneven quality, with some countries still using the outdated Fourth IMF Balance of Payments Manual rather than the Sixth, while several other countries do not report data at all”.

High-frequency phone surveys in some countries reported decreases in remittances for a large percentage of households even while recorded remittances reported by official sources report increases in flows.

The shift from informal to formal channels due to the closure of borders explains in part the increase in the volume of remittances recorded by central banks.

Remittance costs: Sub-Saharan Africa remains the most expensive region to send money to, where sending $200 costs an average of 8.2 per cent in the fourth quarter of 2020. Within the region, which experiences high intra-regional migration, it is expensive to send money from South Africa to Botswana (19.6 per cent), Zimbabwe (14 per cent to), and to Malawi (16 per cent).

Read the full statement below:

Defying predictions: Remittance flows remain strong during COVID-19 crisis:

Despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected. Officially recorded remittance flows to low- and middle-income countries reached $540 billion in 2020, just 1.6 per cent below the 2019 total of $548 billion, according to the latest Migration and Development Brief.

The decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8 per cent). It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which, excluding flows to China, fell by over 30 per cent in 2020. As a result, remittance flows to low- and middle-income countries surpassed the sum of FDI ($259 billion) and overseas development assistance ($179 billion) in 2020.

The main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates. The true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of COVID-19 on informal flows is unclear.

“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank. “Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”

Remittance inflows rose in Latin America and the Caribbean (6.5 per cent), South Asia (5.2 per cent) and the Middle East and North Africa (2.3 per cent). However, remittance flows fell for East Asia and the Pacific (7.9 per cent), for Europe and Central Asia (9.7 per cent), and for Sub-Saharan Africa (12.5 per cent). The decline in flows to Sub-Saharan Africa was almost entirely due to a 28 per cent decline in remittance flows to Nigeria. Excluding flows to Nigeria, remittances to Sub-Saharan Africa increased by 2.3 per cent, demonstrating resilience.

The relatively strong performance of remittance flows during the COVID-19 crisis has also highlighted the importance of timely availability of data. Given its growing significance as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, timely reporting, and granularity by corridor and channel.

“The resilience of remittance flows is remarkable. Remittances are helping to meet families’ increased need for livelihood support,” said Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD. “They can no longer be treated as small change. The World Bank has been monitoring migration and remittance flows for nearly two decades, and we are working with governments and partners to produce timely data and make remittance flows even more productive.”

The World Bank is 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. It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.

With global growth expected to rebound further in 2021 and 2022, remittance flows to low- and middle-income countries are expected to increase by 2.6 per cent to $553 billion in 2021 and by 2.2 per cent to $565 billion in 2022. Even as many high-income nations have made significant progress in vaccinating their populations, infections are still high in several large developing economies and the outlook for remittances remains uncertain.

The global average cost of sending $200 remained high at 6.5 per cent in the fourth quarter of 2020, more than double the Sustainable Development Goal target of 3 per cent. Average remittance costs were the lowest in South Asia (4.9 per cent), while Sub-Saharan Africa continued to have the highest average cost (8.2 per cent). Supporting the remittance infrastructure and keeping remittances flowing includes efforts to lower fees.

Regional Remittance Trends

Formal remittance flows to the East Asia and Pacific region fell by an estimated 7.9 per cent in 2020 to around $136 billion due to the adverse impact of COVID-19. Positive growth in remittances from the United States and Asia helped to mostly offset declines from the Middle East and Europe, which fell by 10.6 per cent and 10.8 per cent, respectively in 2020. The top recipients in terms of the share of remittances in GDP in 2020 include many smaller economies such as Tonga (38 per cent), Samoa (19 per cent), and Marshall Islands (13 per cent). For 2021, a modest growth of about 2.1 per cent is expected due to anticipated recovery in major host economies such as Saudi Arabia, the United States and the United Arab Emirates. Remittance costs: According to the World Bank Remittances Prices Worldwide, the average cost of sending $200 to the region fell slightly to 6.9 per cent in the fourth quarter of 2020. The lowest-cost corridors in the region averaged 3 per cent for transfers primarily to the Philippines, while the highest-cost corridors, excluding South Africa to China, which is an outlier, averaged 13 per cent.

Remittances to Europe and Central Asia fell by about 9.7 per cent to $56 billion in 2020 as the global pandemic and weak oil prices had a significant impact on migrant workers across the region. The economic crisis of 2020 was not unprecedented compared to the past crises of 2009 and 2015, which saw remittances to the region fall by 11 and 15 per cent, respectively. Nearly all the countries in the region experienced declines in remittances in 2020. The depreciation of the Russian ruble significantly lowered the US dollar value of remittance flows to the region. For 2021, remittance flows are estimated to fall further by 3.2 per cent as the region’s economies are expected to recover from the crisis slowly. Remittance costs: The average cost of sending $200 to the region fell modestly to 6.4 per cent in the fourth quarter of 2020. Russia remained the lowest-cost sender of remittances globally, with the cost of remitting from the country falling from 2.1 per cent to 1 per cent. Within the region, the differences in costs across corridors are substantial: the highest costs for sending remittances were from Turkey to Bulgaria, while the lowest costs for sending remittances were from Russia to Georgia.

Remittances flows to Latin America and the Caribbean grew an estimated 6.5 per cent to $103 billion in 2020. While COVID-19 caused a sudden decrease in the volume of remittances in the second quarter of 2020, remittances rebounded during the third and fourth quarters. The improvement in the employment situation in the United States, although not yet to pre-pandemic levels, supported the increase in remittance flows to countries such as Mexico, Guatemala, Dominican Republic, Colombia, El Salvador, Honduras and Jamaica, for whom the bulk of remittances originate from migrants working in the United States. On the other hand, the weaker economic situation in Spain negatively affected remittance flows to Bolivia (-16 per cent), Paraguay (-12.4 per cent) and Peru (-11.7 per cent) in 2020. In 2021, remittance flows to the region are expected to grow by 4.9 per cent. Remittance costs: The cost of remittance transfers to the region was 5.6 per cent in the fourth quarter of 2020. In many smaller remittance corridors, however, costs continue to be exorbitant. For example, the cost of sending money to Cuba exceeds 9 per cent. Sending money from Japan to Brazil is also expensive (11.5 per cent).

Remittance flows to the Middle East and North Africa region rose by 2.3 per cent to about $56 billion in 2020. The growth is largely credited to strong remittance flows to Egypt and Morocco. Flows to Egypt increased 11 per cent to a record high of nearly $30 billion in 2020, while flows to Morocco rose 6.5 per cent. Also registering an increase was Tunisia (2.5 per cent). In contrast, other economies in the region experienced losses in 2020, with Djibouti, Lebanon, Iraq, and Jordan posting double-digit declines. In 2021, remittances to the region is likely to grow 2.6 per cent due to moderate growth in the euro area and weak outflows from the Gulf Cooperation Council (GCC) countries. Remittance costs: The cost of sending $200 to the region fell slightly in the fourth quarter of 2020 to 6.6 per cent. Costs vary greatly across corridors: the cost of sending money from high-income countries of the Organisation for Economic Co-operation and Development to Lebanon remained very high, mostly in the double digits. On the other hand, sending money from GCC countries to Egypt and Jordan costs around 3 per cent in some corridors.

Inward remittance flows to South Asia rose by about 5.2 per cent in 2020 to $147 billion, driven by surge in flows to Bangladesh and Pakistan. In India, the region’s largest recipient country by far, remittances fell by just 0.2 per cent in 2020, with much of the decline due to a 17 per cent drop in remittances from the United Arab Emirates, which offset resilient flows from the United States and other host countries. In Pakistan, remittances rose by about 17 per cent, with the biggest growth coming from Saudi Arabia followed by the European Union countries and the United Arab Emirates. In Bangladesh, remittances also showed a brisk uptick in 2020 (18.4 per cent), and Sri Lanka witnessed remittance growth of 5.8 per cent. In contrast, remittances to Nepal fell by about 2 per cent, reflecting a 17 per cent decline in the first quarter of 2020. For 2021, it is projected that remittances to the region will slow slightly to 3.5 per cent due to a moderation of growth in high-income economies and a further expected drop in migration to the GCC countries. Remittance costs: The average cost of sending $200 to the region stood at 4.9 per cent in the fourth quarter of 2020, the lowest among all the regions. Some of the lowest-cost corridors, originating in the GCC countries and Singapore, had costs below the SDG target of 3 per cent owing to high volumes, competitive markets, and deployment of technology. But costs are well over 10 per cent in the highest-cost corridors.

Remittances to Sub-Saharan Africa declined by an estimated 12.5 per cent in 2020 to $42 billion. The decline was almost entirely due to a 27.7 per cent decline in remittance flows to Nigeria, which alone accounted for over 40 per cent of remittance flows to the region. Excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3 per cent. Remittance growth was reported in Zambia (37 per cent), Mozambique (16 per cent), Kenya (9 per cent) and Ghana (5 per cent). In 2021, remittance flows to the region are projected to rise by 2.6 per cent, supported by improving prospects for growth in high-income countries. Data on remittance flows to Sub-Saharan Africa are sparse and of uneven quality, with some countries still using the outdated Fourth IMF Balance of Payments Manual rather than the Sixth, while several other countries do not report data at all. High-frequency phone surveys in some countries reported decreases in remittances for a large percentage of households even while recorded remittances reported by official sources report increases in flows. The shift from informal to formal channels due to the closure of borders explains in part the increase in the volume of remittances recorded by central banks. Remittance costs: Sub-Saharan Africa remains the most expensive region to send money to, where sending $200 costs an average of 8.2 per cent in the fourth quarter of 2020. Within the region, which experiences high intra-regional migration, it is expensive to send money from South Africa to Botswana (19.6 per cent), Zimbabwe (14 per cent to), and to Malawi (16 per cent).

Detailed analysis of global and regional trends are available in the Migration and Development Brief 34 at www.knomad.org and http://blogs.worldbank.org/peoplemove/.

World Bank Group Response to COVID-19 (coronavirus)

The World Bank, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries respond to the health, social and economic impacts of COVID-19. This includes $12 billion to help low- and middle-income countries purchase and distribute COVID-19 vaccines, tests, and treatments, and strengthen vaccination systems. The financing builds on the broader World Bank Group COVID-19 response, which is helping more than 100 countries strengthen health systems, support the poorest households, and create supportive conditions to maintain livelihoods and jobs for those hit hardest.

Source: ClassFMonline.com

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