The projected dip in remittances to African countries will not be as bad as initially feared.
Early World Bank estimates in April had predicted a 23.1% drop in remittances to sub-Saharan African countries this year in the wake of economic shocks in the aftermath of the Covid-19 pandemic. But the bank’s updated estimates dportray a more positive outlook.
Remittances to the region are now projected to decline by 9% in 2020 and 6% in 2021. By those estimates, total remittances to sub-Saharan Africa this year are expected to be around $44 billion, down from $48 billion last year. Globally, World Bank’s latest estimates now project that, compared to 2019 levels, remittances to low and middle income countries will fall by 7% in 2020 and a further 7.5% in 2021.
Much of the expected shrinkage in remittances to sub-Saharan African countries is connected to slower rates of migration given international travel restrictions as fewer Africans will be able to move abroad and then send money home.
But just as important is the reality of African migrants being caught in the cross-hairs of the economic effects of the pandemic. With African migrants in wealthier countries across Europe, North America, the Middle East, and Asia losing jobs or having their pay cut due to the coronavirus outbreak and subsequent lockdowns, there is expected to be a significant drop-off in funds sent home.
These countries, including the US, France, UK and China, account for up to a quarter of all funds remitted to African countries. An example is seen in Lebanon where thousands of mostly Ethiopian and Nigerian workers have lost their jobs and are increasingly seeking ways to return home.
While sub-Saharan Africa will still receive over $40 billion in remittances this year, the cost of sending the money to the region remains the highest globally with only marginal progress made recently. On average, sending $200 to sub-Saharan Africa costs 8.5%—down from 9% last year. However, the cost rate is still much higher than the global average of 6.8% and nearly triple the Sustainable Development Goal target of 3% cost rates by 2030.
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