Zulfath Saheed underscores the need to manage the post-COVID remittance decline

The coronavirus pandemic is having a widespread impact on the economic front across the globe, leading to a loss of livelihoods and future prospects for a broad cross section of society – and this may not augur well for the months or even years that lie ahead.

One major area of concern relates to migrant workers abroad and the potential decline in remittances to their countries of origin, thereby resulting in a substantial loss of foreign earnings on which these nations so greatly depend.

While South Asia in general is identified as a key source of migrant workers, Sri Lanka too is witnessing the effects of a protracted repatriation amid a surge in the COVID-19 case load in countries where these individuals have ventured in search of employment.

CORONAVIRUS  EFFECT The impact of COVID-19 on global migrant remittances to low and middle income nations is expected to be one of substantial decline – amounting to a contraction of approximately one-fifth in 2020 (or US$ 110 billion), according to a recent World Bank forecast.

Moreover, the UN Capital Development Fund (UNCDF) notes: “The hardship of COVID-19 felt by migrants in a loss of wages and employment – often without government safety nets in the countries that host them – is a large part of this crisis in remittances.”

The UNCDF points out that “the decline also results from a host of issues caused by the coronavirus for the services that migrants use to send money home – including the restrictions placed on remittance services providers and their agents.”

And while the decline in remittance flows represents a loss of vital financing for vulnerable households and the growing economic effects of the pandemic have a major impact on migrants’ home countries, it also affects the local economy of host nations.

SOUTH ASIA FALLOUT The World Economic Forum (WEF) asserts that the projected sharp decline in remittances to households in South Asia “can potentially push back decades of progress made by the region on poverty reduction, income inequality, nutrition, health and education.”

Remittances have a significant role to play in South Asian economies with India deemed to be the single largest recipient of remittances while accounting for almost 28 percent and eight percent of GDP in Nepal and Pakistan respectively.

WEF states that due to the COVID-19 fallout, “in South Asia, it is projected that remittances will fall by more than 22 percent in 2020 (marginally above the global trend projected by the World Bank) before recovering next year. Figures released by their respective central banks show that year on year, remittances for… April fell by 25 percent in Bangladesh and 14 percent in Sri Lanka.”

THE STATE OF PLAY For the first time since the outbreak, workers’ remittances to Sri Lanka registered an uptick in June – up seven percent year on year to 572 million dollars – which according to the Central Bank of Sri Lanka was due to “festival allowances received by the migrant workers in the Middle East.”

On a cumulative basis however, workers’ remittances to the island recorded a decline of nine percent year on year in the first six months of the year. Moreover, it is reported that Sri Lanka expects a near 15 percent drop in workers’ remittances this year.

It is as yet unclear what will become of returning migrant workers in the post-COVID era – they may not look to head back to overseas markets should there be a risk of health hazards and could find it challenging to procure work locally with remuneration to match what’s offered by foreign countries.

Nevertheless, if they are to continue to contribute to the national economy and the strain on migrant worker families is to be alleviated, a programme of reskilling and reintegration may be called for.

MITIGATION MEASURES Cooperation between the public and private sectors is likely to prove pivotal in managing the impact of the pandemic on remittances. And given the significance of such payment flows in South Asia, the WEF highlights four immediate steps that stakeholders in the region ought to take to arrest the decline in foreign earnings.

They comprise declaring the provision of remittance services as an essential service to keep remittance service providers’ outlets open to the public; providing fiscal and monetary incentives; including remittances in the broader migration debate and reducing the average cost to achieve the UN Sustainable Development Goal (SDG) target.

Ultimately, the true value of remittances depends on how they are utilised by migrant worker families whereby investing such income flows will help build social and economic capital for generations to come.

With many such household units reeling from the unexpected impact of COVID-19, this may well be the right time for other economic stakeholders to offer them the support they desperately need.