World Bank Remittances to low And middle income countries hit $540bn

Remittance flows to low and middle income countries reached $540 billion last year, just 1.6 percent below the 2019 total of $548 billion, latest Migration and Development Brief by World Bank has shown.

The bank said the decline in recorded remittance flows last year was smaller than the one during the 2009 global financial crisis (4.8 percent.)

It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which, excluding flows to China, fell by over 30 percent in 2020. 

As a result, remittance flows to low-and middle-income countries surpassed the sum of FDI ($259 billion) and overseas development assistance ($179 billion) in 2020.

The main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates. 

The true size of remittances, which includes formal and informal flows, is believed to be larger than those reported data, though the extent of the impact of COVID-19 on informal flows is unclear.

“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, the Global Director, Social Protection and Jobs Global Practice at the World Bank.

“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”

Remittance Inflow Rise

Remittance inflows rose in Latin America and the Caribbean (6.5 percent), South Asia (5.2 percent) and the Middle East and North Africa (2.3 percent). 

However, remittance flows fell for East Asia and the Pacific (7.9 percent), for Europe and Central Asia (9.7 percent), and for Sub-Saharan Africa (12.5 percent). 

The decline in flows to Sub-Saharan Africa was almost entirely due to a 28 percent decline in remittance flows to Nigeria. Excluding flows to Nigeria, remittances to Sub-Saharan Africa increased by 2.3 percent, demonstrating resilience.

The relatively strong performance of remittance flows during the COVID-19 crisis has also highlighted the importance of timely availability of data. 

With its growing significance as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, timely reporting, and granularity by corridor and channel.

The World Bank is assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows. 

It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.

Nation/Hauwa Abu