- May 19, 2022
- Posted by: Charles Yeboah Nixon
- Categories: Economics, Finance
Officially recorded remittance flows to low- and middle-income countries (LMICs) are expected to increase by 4.2% this year to reach $630 billion.
This follows an almost record recovery of 8.6% in 2021, according to the World Bank’s latest Migration and Development Brief released today.
Remittances to Ukraine, which is the largest recipient in Europe and Central Asia, are expected to rise by over 20% in 2022.
However, remittance flows to many Central Asian countries, for which the main source is Russia, will likely fall dramatically. These declines, combined with rising food, fertilizer, and oil prices, are likely to increase risks to food security and exacerbate poverty in many of these countries.
“The Russian invasion of Ukraine has triggered large-scale humanitarian, migration and refugee crises and risks for a global economy that is still dealing with the impact of the COVID pandemic,” saidMichal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
“Boosting social protection programs to protect the most vulnerable, including Ukrainians and families in Central Asia, as well as those affected by the war’s economic impact, is a key priority to protect people from the threats of food insecurity and rising poverty.”
During 2021, remittance inflows saw strong gains in Latin America and the Caribbean (25.3%), Sub-Saharan Africa (14.1%), Europe and Central Asia (7.8%), the Middle East and North Africa (7.6%), and South Asia (6.9%). Remittances to East Asia and the Pacific fell by 3.3%; although excluding China, remittances grew 2.5%.
Excluding China, remittance flows have been the largest source of external finance for LMICs since 2015.
The top five recipient countries for remittances in 2021 were India, Mexico (replacing China), China, the Philippines, and Egypt.
Among economies where remittance inflows stand at very high shares of Gross Domestic Product (GDP) are Lebanon (54%), Tonga (44%), Tajikistan (34%), Kyrgyz Republic (33%), and Samoa (32%).
“On the one hand, the Ukraine crisis has shifted global policy attention away from other developing regions and from economic migration. On the other hand, it has strengthened the case for supporting destination communities that are experiencing a large influx of migrants,” said Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD.
“As the global community prepares to gather at the International Migration Review Forum, the creation of a Concessional Financing Facility for Migration to support destination communities should be seriously considered. This facility could also provide financial support to origin communities experiencing return migration during the COVID-19 crisis.”
Globally, the average cost of sending $200 was 6% in the fourth quarter of 2021, double the SDG target of 3%, according to the Bank’s Remittances Prices Worldwide Database.
It is cheapest to send money to South Asia (4.3%) and most expensive to send to Sub-Saharan Africa (7.8%).
The costs of sending money to Ukraine are high (7.1% from Czech Republic, 6.5% from Germany, 5.9% from Poland, and 5.2% from USA).
The global goodwill towards refugees and migrants from Ukraine opens an opportunity to develop and pilot programs to facilitate their access to jobs and social services in host countries, apply simplified anti-money laundering and counter-terrorist financing procedures for small remittance transactions to help reduce remittance costs and mobilize diaspora bond financing.
The war in Ukraine has also affected the international payment systems with implications for cross-border remittance flows. The exclusion of Russia from SWIFT has added a national security dimension to participation in international payments systems.
