Yusuf Ahmed, a taxi driver in the U.S., has been unable to send money to support his brother and his family of six in Somalia due to stay-at-home orders and economic uncertainty back home. Ahmed is just one of millions facing similar circumstances as remittance flows have been disrupted because of the COVID-19 pandemic. Total remittances are expected to decrease globally by 20% in 2020, down from a cumulative $554 billion in 2019 to $445 billion this year.
This sudden decline in remittance flows comes at a time when remittances have gained prominence as a tool for poverty eradication and development finance. Around one-in-nine people globally depend on remittances sent home by migrant workers. Recipients of remittances in developing nations save or invest remittances in long-term projects that build resilience and independence and generate income and jobs.
Remittances account for more than 5% of GDP in over 60 low- and middle-income countries. In Venezuela, 2 million households— about 35% of households in the country— rely on remittance payments from family members abroad. In Haiti, remittance payments total $3 billion, making up 30% of national GDP.
“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.”
David Malpass, President, World Bank Group
To make matters worse, foreign direct investments are expected to decline by 35% in 2020 due to COVID-19. And as economic conditions worsen, the World Bank estimates that 40 to 60 million people may be pushed into extreme poverty in 2020.
World Bank Group President David Malpass noted recently, “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.”
Both the World Bank and the International Monetary Fund (IMF) are calling for bold international action to support migrant workers and their dependents and allow them easier access to remittances. The World Bank recommended the classification of remittance service providers as essential workers and the disbursement of remittances through digital means. Building off the World Bank’s suggested intervention, the IMF called on host countries to stabilize employment opportunities for their migrant workers to keep remittance payments flowing.
Without adequate U.S. leadership in addressing the impacts of COVID-19, including the remittance crisis, millions of families and nascent economies will suffer. The decline in remittances is just one example of how COVID-19 is causing economic devastation throughout the world. With many low- and middle-income countries already strained in their ability to provide an adequate social safety net for their own populations, the drying-up of remittances will worsen conditions for families facing economic hardship.
American leadership is essential to mitigating the global economic crisis and preventing additional setbacks in global development. Through investments and partnerships with other leading global powers, the United States can help keep remittances flowing and respond to COVID-19’s economic consequences worldwide.