Remittances are a vital source of income for developing countries, and news that global remittances are projected to decline sharply by about 20 percent this year because the COVID-19 induced economic crisis sends the chill.
The projected fall would be the sharpest decline in recent history 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.
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 labor in disadvantaged households.
Many Ghanaian and African households depend on a relative abroad to send down money to cater to the needs of both nuclear and extended families since in Africa communal living has been the basis for our existence for millennia.
Effective social protection systems are crucial to safeguarding the poor and vulnerable during this crisis in both developing countries as well as advanced countries, the World Bank says.
The International Monetary Fund (IMF), released a report from the April 2020 virtual Spring Meetings on Sub-Sahara Africa observed that remittance flows may also decrease as global growth slows, reducing disposable income and adding to external pressures.
The IMF believes pandemic’s impact on Sub-Saharan African will come from three main shocks namely, economic disruptions, spillovers from global fallouts, and commodity price shocks.
Additionally, the continent faces several external shocks which include trade and tighter global financial conditions. It is for the aforementioned reasons why some economic analysts have predicted that poverty in sub-Saharan Africa will be exacerbated by the COVID-19 pandemic and hence the call for greater social protection in times like these.
To compound the situation further, the sharp decline of commodity prices will hit the region’s resource-intensive countries and that is an added blow that COVID-19 will visit on many African countries.
In spite of the gloomy picture, the IMF is confident that growth will start to recover in the second half of this year as containment measures ease, and significant economic stimulus will prop up economic activity.
Growth in the region is projected to recover in 2021 provided the spread of the novel virus is arrested with the discovery of a vaccine that proves efficacious. Several clinical trials are underway in the West and will go public soon to our relief.