Wed | Jul 8, 2020

UN agency says coronavirus presents opportunity to fix remittance systems

Published:Wednesday | June 3, 2020 | 10:41 AM

ROME, CMC – The International Fund for Agricultural Development (IFAD) says that the coronavirus (COVID-19) pandemic is both a challenge and an opportunity to fix the remittance systems in the Caribbean and other places.

“With a Euro here and a dollar there, remittances, the money that migrant workers send home to their families,  have been adding up in a big way to contribute to the Sustainable Development Goals and lift tens of millions out of extreme poverty,” said IFAD.

“Then came the COVID-19 pandemic  and, ironically, a chance to improve a unique segment of the global financial system that accounts for more than five per cent of gross domestic product for at least 60 low- and medium-income countries – more than the total of foreign direct investment or official development assistance handed out by governments,” it added.

IFAD president, Gilbert F. Houngbo, said that “regardless of whether nor not the (post-coronavirus) recovery will be faster than expected, the global pandemic has exposed the vulnerabilities of the global remittance systems.”

“That is why now is the time to fix these vulnerabilities no matter what the economic scenario will be”, he said in the run-up to the International Day of Family Remittances on June 16.

Last year, remittances to low and medium-income countries hit a record US$554 billion, according to the World Bank, with 200 million migrant workers in 40 rich countries sending home funds to support 800 million relatives in more than 125 developing nations.

Half of those receiving families live in rural areas where remittances count the most, Houngbo said.

But with the onset of the novel coronavirus pandemic, the World Bank projects that cross-border remittances will fall by 20 per cent, or US$110 billion, to US$445 billion, potentially pulling tens of millions below the poverty line while undermining progress towards fulfilling the 2030 UN Agenda for Sustainable Development.

With no v-shaped recovery likely in 2021, Houngbo said savings will be depleted, and local conditions will worsen, as remittances are not expected to return to pre-pandemic levels for some time.

“While the reduction in remittances will not fall evenly on all families, nor across all continents, societal impacts will be substantial and sustained”, he said.

In response, the UN said Switzerland and the United Kingdom, joined by several other member states, the World Bank, the United Nations Development Program (UNDP) and other UN agencies and industry groups, issued a global “call to action” on May 22 to ensure that migrant workers and diaspora communities can keep sending back money in ways that can also improve the remittance system.

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