Africa-COVID-19: Worrying decline in remittances from the Diaspora
The United Nations Economic Commission for Africa is concerned about the alarming decline in remittances from African Diaspora. With the global economic crisis, these Diasporas are sending less money to their countries of origin. This year, the decline is expected to reach 21% or $18 billion less than in 2019.
The anti-poverty organization ONE and the United Nations Economic Commission for Africa (ECA), highlighted, in a recent report titled “Preserving remittances in the time of COVID-19’, the severe impact which the global Covid-19 pandemic has had on remittance inflows to Africa, mainly due to the situation of migrants in the countries mostly affected.
The report notes that remittances have steadily increased over the past few decades and have become the main financial inflow in developing countries, surpassing foreign aid, private capital flows and foreign direct investment.
However, due to the global outbreak of the Covid-19 pandemic, which has caused a global economic downturn, remittance flows to Africa are projected to decline by 21 per cent in 2020. Transfers would thus decrease from $85 billion in 2019 to $67 billion this year. And for many families living in anticipation of the windfall sent by parents who have gone “north”, this is a problem.
In Mali, remittances account for more than 7% of the gross domestic product. In the Comoros, 20 to 30% of household income is made up of remittances sent from Europe. In other words, a drop in remittances is bad news for millions of people.
The explanation for this drop in remittances is simple: migrants are among the first victims of the economic crisis that is hitting all economies, with the notable exception of China. When there is a shortage of work, or when states do not sufficiently support workers through social benefits, remittances decrease.
Millions of migrant workers find themselves unemployed, as is the case in Europe, the Gulf countries or the United States. So, after more than a decade of growth, remittances from African Diasporas are declining.
For the Economic Commission for Africa, it is urgent that the countries of the North reduce bank fees related to money transfers. Currently, the costs are enormous. The Commission has calculated that the average cost in the world for a shipment of 500 dollars is 5%, or 25 dollars. It rises to 7% for a transfer of 200 dollars to some countries. This is far from the 3% set by the UN in its objectives of sustainable development.
Ideally, the commission believes, during this pandemic period, financial institutions, supported by governments, should reduce money transfer fees to zero. In 2017, the banks earned $30 billion in commission on these transfers. In addition, the UN is urging all countries to include migrants in their social protection provision so that they can continue to help their relatives in Africa.