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World Bank Predicts Sharpest Decline of Remittances in Recent History

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Global remittances are projected to decline sharply by about 20 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown. The projected fall, which would be the sharpest decline in recent history, is 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. Remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 percent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.

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. A fall in remittances affect families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.

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,” said World Bank Group President David Malpass. “Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs.”

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.

Remittance flows are expected to fall across all World Bank Group regions, most notably in Europe and Central Asia (27.5 percent), followed by Sub-Saharan Africa (23.1 percent), South Asia (22.1 percent), the Middle East and North Africa (19.6 percent), Latin America and the Caribbean (19.3 percent), and East Asia and the Pacific (13 percent).

The large decline in remittances flows in 2020 comes after remittances to LMICs reached a record $554 billion in 2019. Even with the decline, remittance flows are expected to become even more important as a source of external financing for LMICs as the fall in foreign direct investment is expected to be larger (more than 35 percent). In 2019, remittance flows to LMICs became larger than FDI, an important milestone for monitoring resource flows to developing countries.

In 2021, the World Bank estimates that remittances to LMICs will recover and rise by 5.6 percent to $470 billion. The outlook for remittance remains as uncertain as the impact of COVID-19 on the outlook for global growth and on the measures to restrain the spread of the disease. In the past, remittances have been counter-cyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties.

Effective social protection systems are crucial to safeguarding the poor and vulnerable during this crisis in both developing countries as well as advanced countries. In host countries, social protection interventions should also support migrant populations,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.

The global average cost of sending $200 remains high at 6.8 percent in the first quarter of 2020, only slightly below the previous year. Sub-Saharan Africa continued to have the highest average cost, at about 9 percent, yet intra-regional migrants in Sub-Saharan Africa comprise over two-thirds of all international migration from the region.

Quick actions that make it easier to send and receive remittances can provide much-needed support to the lives of migrants and their families. These include treating remittance services as essential and making them more accessible to migrants,” said Dilip Ratha, lead author of the Brief and head of KNOMAD.


Regional Remittance Trends

Remittance flows to the East Asia and Pacific region grew by 2.6 percent to $147 billion in 2019, about 4.3 percentage points lower than the growth rate in 2018. In 2020, remittance flows are expected to decline by 13 percent. The slowdown is expected to be driven by declining inflows from the United States, the largest source of remittances to the region. Several remittance-dependent countries such as those in the Pacific Islands could see households at risk as remittance incomes decline over this period. A recovery of 7.5 percent growth for the region is anticipated in 2021. Remittance costs: The average cost of sending $200 to the East Asia and Pacific region dropped to 7.13 percent in the first quarter of 2020, compared to the same quarter in 2019. The five lowest cost corridors in the region averaged 2.6 percent while the five highest cost corridors averaged 15.4 percent as of 2019 Q4.

Remittances to countries in Europe and Central Asia remained strong in 2019, growing by about 6 percent to $65 billion in 2019. Ukraine remained the largest recipient of remittances in the region, receiving a record high of nearly $16 billion in 2019. Smaller remittance-dependent economies in the region, such as Kyrgyz Republic, Tajikistan, and Uzbekistan, particularly benefited from rebound of economic activity in Russia. In 2020, remittances are estimated to fall by about 28 percent due to the combined effect of the global coronavirus pandemic and lower oil prices. Remittance costs: The average cost of sending $200 to the ECA region declined modestly to 6.48 percent in the first quarter of 2020 from 6.67 percent a year earlier. The differences in costs across corridors in the region are substantial; the highest costs for sending remittances were from Turkey to Bulgaria, while the lowest costs for sending remittances were from Russia to Azerbaijan.

Remittances flows into Latin America and the Caribbean grew 7.4 percent to $96 billion in 2019. Growth in inflows was uneven across countries in the region. Brazil, Guatemala and Honduras saw a rise in remittances of more than 12 percent in 2019. Colombia, Ecuador, Nicaragua and Panama had an increase of more than 6 percent, while remittances to Bolivia and Paraguay declined by 3.8 percent and 2.2 percent, respectively. In 2020, remittance flows to the region is estimated to fall by 19.3 percent. Remittance costs: The average cost of sending $200 to the region was 5.97 percent in the first quarter of 2020. Amid the COVID-19 crisis, the costs of transferring remittances to the region could increase due to operational challenges being faced by remittance service providers (closures of agents and offices, access to cash, foreign exchange, security) and compliance with AML/CFT regulations.

Remittances to the Middle East and North Africa region are projected to fall by 19.6 percent to $47 billion in 2020, following the 2.6 percent growth seen in 2019. The anticipated decline is attributable to the global slowdown as well as the impact of lower oil prices in GCC countries. Remittances from the euro area would also be impacted by the area’s pre-COVID-19 economic slowdown and the depreciation of the euro against the U.S. dollar. In 2021, remittances to the region is expected to recover, albeit at a slow pace of around 1.6 percent due to projected moderate growth in the euro area and weak GCC outflows. Remittance costs: The cost of sending $200 to the region was 7 percent, largely unchanged from the previous year. Costs vary greatly across corridors. The cost of sending money from high-income OECD countries to Lebanon continues to be in the double digits. Sending money from GCC countries to Egypt and Jordan costs between 3 percent to 5 percent in some corridors. The Saudi Arabia to Syria corridor has experienced a dramatic fall in costs as the civil war in Syria has receded.

Remittances to South Asia are projected to decline by 22 percent to $109 billion in 2020, following the growth of 6.1 percent in 2019. The deceleration in remittances to the South Asian region in 2020 is driven by the global economic slowdown due to the coronavirus outbreak as well as oil price declines. The economic slowdown is likely to directly affect remittance outflows from the United States, the United Kingdom, and EU countries to South Asia. Falling oil prices will affect remittance outflows from GCC countries and Malaysia. Remittance costs: South Asia had the lowest average remittance costs of any region, at 4.95 percent. Some of the lowest-cost corridors had costs below the 3 percent SDG target. This is probably due to high volumes, competitive markets, and deployment of technology. But costs are well over 10 percent in the highest-cost corridors due to low volumes, little competition, and regulatory concerns. Banking regulations related to AML/CFT raise the risk profile of remittance service providers and thereby increase costs for some receiving countries such as Afghanistan and sending countries such as Pakistan.

Remittances to Sub-Saharan Africa registered a small decline of 0.5 percent to $48 billion in 2019. Due to the COVID-19 crisis, remittance flows to the region are expected to decline by 23.1 percent to reach $37 billion in 2020, while a recovery of 4 percent is expected in 2021. The anticipated decline can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where African migrants reside including in the EU area, the United States, the Middle East, and China. These large economies host a large share of Sub-Saharan African migrants and combined, are a source of close to a quarter of total remittances sent to the region. In addition to the pandemic’s impact, many countries in the Eastern Africa region are experiencing a severe outbreak of desert locusts attacking crops and threatening the food supply for people in the region. Remittance costs: Sending $200 remittances to the region cost 8.9 percent on average in the first quarter of 2020, a modest decrease compared with the average cost of 9.25 percent a year before. The most expensive corridors are observed mainly in the Southern African region, with costs as high as 20 percent. At the other end of the spectrum, the less expensive corridors had average costs of less than 3.6 percent.

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Development

ADB, Habitat for Humanity to Support Housing Microloans for Vulnerable Communities

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The Asian Development Bank (ADB) has teamed with Habitat for Humanity International to help microfinance institutions (MFIs) deliver housing loans to low-income families in rural and peri-urban areas of Bangladesh, India, Indonesia, and the Philippines.

The collaboration will expand ADB’s Microfinance Risk Participation and Guarantee Program to include microloans for housing, home improvement, and water and sanitation for vulnerable and climate change-exposed communities. ADB will help MFIs obtain financing for these purposes from commercial banks of up to $30 million in the first phase. Habitat for Humanity will build the MFIs’ capacity to design, pilot-test, and roll out the loans, with technical assistance from ADB.

“Low-income families find it difficult to build resilient houses as they lack adequate and affordable financing options due to the collateral requirements of commercial banks,” said ADB Private Sector Financial Institutions Division Director Christine Engstrom. “MFIs have the networks to reach these communities, but often lack the technical capacities to deliver housing microloans to them. Building on Habitat for Humanity’s technical and training expertise, this inaugural partnership will enable ADB’s Microfinance Program to better address this market gap.”

“The demand for urban housing in Asia remains largely unmet, giving the private sector a critical opportunity to deliver affordable materials, construction quality, access to energy, gender equity, water supply, and sanitation services, while supporting greater gender equity,” said Habitat for Humanity International Chief Operating Officer Patrick Canagasingham. “With ADB, we will create enabling environments for MFIs through risk-sharing and capacity building, helping unlock local private sector capital for housing.”

“This partnership is timely, as micro-housing for the poor and investing in community resilience are key drivers of economic recovery from the pandemic,” said Lead of ADB’s Microfinance Program Anshukant Taneja.

An expected 20,000 households will receive housing microloans from partner MFIs in the program’s first phase to enhance construction quality and climate resilience, including upgrading semi-permanent structures and installing sanitation and water connections. ADB also aims to encourage private sector financing through risk-allocation and guarantees. The collaboration will help to empower women, with 90% of financing targeted for women micro-borrowers.

Habitat for Humanity began in 1976 and has grown into a leading global nonprofit, working in more than 70 countries. Habitat’s Terwilliger Center for Innovation in Shelter works with the private sector to pilot new products and approaches for housing finance, materials, and services. From July 2019 to June 2020, Habitat helped more than 1.9 million people in Asia and the Pacific gain access to better housing.

ADB’s Private Sector Operations Department will also explore opportunities to work with Habitat for Humanity to scale the organization’s catalytic initiatives, including the MicroBuild Fund, which has deployed over $140 million in housing finance loans through MFIs, with 19% allocated in Asia and the Pacific. ADB’s Microfinance Program has helped more than 6 million borrowers gain access to microloans.

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Africa Today

The Gambia Secures More Funds for COVID-19 Vaccines

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World Bank Board approved $8 million additional financing from the International Development Association (IDA) to provide The Gambia with safe and effective vaccine purchase and deployment.

“With this additional financing, the World Bank is helping The Gambia strengthen their pandemic response and health care systems, as well as scale up its vaccination campaign, with a total contribution of $19 million towards the implementation of the Government’s National COVID-19 Preparedness and Response Plan,” said Feyi Boroffice, World Bank Resident Representative for The Gambia.

The additional financing for Gambia COVID-19 Vaccine Preparedness and Response Project will strengthen immunization systems and service delivery capacity to support the COVID-19 vaccination roll-out. It will expand The Gambia’s access to vaccines, through direct purchases from manufacturers and other arrangements through the African Vaccine Acquisition Trust convened by the African Union.

“The COVAX Facility will provide vaccine doses to cover 480,000 people and this additional financing from the World Bank will make it possible to have sufficient vaccine doses to cover 980,000 more people, with nearly all adults in the Gambia having access,” said Samuel Mills, World Bank Task Team Leader for the project. “It is now important for people to be adequately informed that the benefits of COVID-19 vaccination outweigh the risk of not getting the vaccine.”

To help prepare the National Deployment and Vaccination Plan for COVID-19 vaccines, the government conducted a vaccine readiness assessment with support from the World Bank, the World Health Organizations (WHO), the United Nation Children’s Fund (UNICEF) and the Global Alliance for Vaccines and Immunizations (GAVI). The assessment showed that the country has trained medical staff, a monitoring system in place, as well as adequate storage capacity to handle both routine vaccines and COVID-19 vaccine at temperatures between 2°C and 8°C. This additional financing will also support the procurement of ultracold freezers to augment the cold chain to store vaccines such as the Pfizer/BioNTech vaccine which require sub-zero storage, and the freezers will subsequently be used by the National Blood Transfusion Center for storing blood plasma.

In addition, the World Bank has supported the Ministry of Health in procuring innovative and environment friendly health care waste treatment technology to allow safe decontamination in hospitals. The Foundation Stone Laying Ceremony will be held tomorrow for the construction of clinical waste treatment centers at Farato and at Edward Francis Small Teaching Hospital. The project contributed to the renovation of the Ndemban Clinic, which operates as a COVID-19 treatment center, and procured 10 ambulances for intensive care, critical life-saving medical equipment and supplies, as well as six pickup trucks and 18 motorcycles to facilitate contact tracing and response.

This $8 million funding package for The Gambia is one of several projects in support for the COVID-19 vaccination effort across Africa and other regions. Today, the World Bank Board also approved additional financing for Côte d’Ivoire ($100 million), Eswatini ($5 million), Rwanda ($30 million), El Salvador ($50 million) and Honduras ($20 million).

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Human Rights

Six reasons why a healthy environment should be a human right

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At least 155 states recognize their citizens have the right to live in a healthy environment, either through national legislation or international accords, like the Universal Declaration of Human Rights.

Despite those protections, the World Health Organization estimates that 23 per cent of all deaths are linked to “environmental risks” like air pollution, water contamination and chemical exposure.

Statistics like that are why the United Nations Human Rights Council recently passed a resolution reaffirming states’ obligations to protect human rights, including by taking stronger actions on environmental challenges.

Here are some of the ways that a compromised planet is now compromising the human right to health.

 1. The destruction of wild spaces facilitates the emergence of zoonotic diseases.

The alteration of land to create space for homes, farms and industries has put humans in increasing contact with wildlife and has created opportunities for pathogens to spill over from wild animals to people.

An estimated 60 per cent of human infections are of animal origin. And there are plenty of other viruses poised to jump from animals to humans. According to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, “as many as 1.7 million unidentified viruses of the type known to infect people are believed to still exist in mammals and waterfowl. Any one of these could be the next ‘Disease X’ – potentially even more disruptive and lethal than COVID-19.”

2. Air pollution reduces quality of health and lowers life expectancy.

Across the globe, nine in 10 people are breathing unclean air, harming their health and shortening their life span. Every year, about 7 million people die from diseases and infections related to air pollution, more than five times the number of people who perish in road traffic collisions.

Exposure to pollutants can also affect the brain, causing developmental delays, behavioural problems and even lower IQs in children. In older people, pollutants are associated with Alzheimer’s and Parkinson’s diseases.

3. Biodiversity loss compromises the nutritional value of food.

In the last 50 years alone, human diets have become 37 per cent more similar, with just 12 crops and five animal species providing 75 per cent of the world’s energy intake. Today, nearly one in three people suffer from some form of malnutrition and much of the world’s population is affected by diet-related diseases, such as heart disease, diabetes and cancer.

 4. Biodiversity loss also reduces the scope and efficacy of medicines.

Natural products comprise a large portion of existing pharmaceuticals and have been particularly important in the area of cancer therapy. But estimates suggest that 15,000 medicinal plant species are at risk of extinction and that the Earth loses at least one potential major drug every two years.

 5. Pollution is threatening billions worldwide.

Many health issues spring from pollution and the idea that waste can be thrown “away” when, in fact, much of it remains in ecosystems, affecting both environmental and human health.

Water contaminated by waste, untreated sewage, agricultural runoff and industrial discharge puts 1.8 billion people at risk of contracting cholera, dysentery, typhoid and polio. Methylmercury – a substance found in everyday products that contaminate fish – can have toxic effects on the nervous, digestive and immune systems when consumed by humans. And a growing body of evidence suggests that there is a cause for concern about the impact of microplastics on marine life and the food web.

As well, every year, 25 million people suffer from acute pesticide poisoning. And glyphosate – the world’s most widely-used herbicide– is associated with non-Hodgkin lymphoma and other cancers.

Even medicines can have a negative impact as they infiltrate ecosystems. A 2017 UNEP report found that antibiotics have become less effective as medicine because of their widespread use in promoting livestock growth. About 700,000 people die of resistant infections every year.

 6. Climate change introduces additional risks to health and safety.

The last decade was the hottest in human history and we are already experiencing the impacts of climate change, with wildfires, floods and hurricanes becoming regular events that threaten lives, livelihoods and food security. Climate change also affects the survival of microbes, facilitating the spread of viruses. According to an article published by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, “pandemics are likely to happen more frequently, spread more rapidly, have greater economic impact and kill more people.”

UNEP

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