PRETORIA - Global remittances are forecast to decline by about 20% this year as the economic crisis caused by the coronavirus pandemic shuts down business activity, the World Bank said in a report released on Wednesday.
The apex bank said this is the sharpest decline on record for what has become a lifeline for many people in Africa and elsewhere.
"The projected fall, which would be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country," the bank said.
Globally money sent home by workers abroad to low and middle-income countries is forecast to fall by about $445bn.
The decline for sub-Saharan Africa is predicted to be 23% and amount to $37bn this year.
The bank's report also highlights how the cost of sending money to the region is about a third more expensive than the global average. The average commission charged for sending $200 is 9%, but for southern Africa it can cost as much as 20%.
According to the World Bank, 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.
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 livelihoods 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.
“Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs," World Bank Group President David Malpass said.