Pandemic Hits Global Poor: World Bank Projects Drop In Remittances
MICHEL MARTIN, HOST:
Another way the coronavirus pandemic is causing hardship is through a sharp decline in remittances - in other words, money sent from one place to another. Migrant workers, for example, often send cash to family members back home.
DILIP RATHA: Each migrant sending money probably benefits the immediate family, which could be four people, five people, or maybe even 10 people. Or it might benefit even larger number of people in the community.
MARTIN: That's Dilip Ratha. He is an economist who tracks remittances for the World Bank. The bank projects that remittances will shrink by about 14% this year. And that's a big deal because along with supporting families, remittances are a critical source of income for many developing countries.
RATHA: In Mexico, remittances are larger than oil exports. In Egypt, remittances are, like, seven times the revenue from Suez Canal. So these are important for these large countries.
MARTIN: He says there are many reasons for the slowdown. One major factor is that efforts to control the pandemic have hurt industries that employ a lot of migrants - think manufacturing, restaurants and hotels. But he says there's another reason.
RATHA: About 80 to 85% of total remittances actually are cash-based. So a migrant worker takes the cash, goes to a store, sends the money from there, and then the money arrives in a store in the recipient country. And then the family goes and picks up the cash. Now, with the lockdowns, these stores were also not open. So initially, there was a major disruption in remittance flows to developing countries.
MARTIN: Ratha says the projected decrease of 14% translates to billions of dollars, and a decrease of that size is unlike anything he's ever seen.
RATHA: That would be unprecedented. Even during the worst financial crisis that we saw in 2009, remittance flows to low and middle-income countries fell only by less than 5%, and they bounced back quickly the year after. This year, we are looking at two consecutive years of decline, and that would cause hardships to a large number of people.
MARTIN: Despite these challenges, Ratha says the slowdown could be worse, at least here in the U.S.
RATHA: So a large number of doctors and nurses are actually migrant workers. They are migrants. And in the front lines of the current situation, current economy, where we are so dependent on - let's say, the grocery stores, the cleaning crews, the people who deliver food and other things - these sectors - and including IT - they have a huge number of migrant workers working there. And interestingly, that has translated into actually relative resilience of remittances.
MARTIN: He says more can be done, though, to support people on both sides of the transaction, like reducing transfer fees and increasing access to online banking to prevent in-person transfers. But...
RATHA: You cannot use digital remittance channels, online channels unless you have a bank account. And that is another area. How to give access to bank accounts to more migrants and their families back home is also a policy imperative.
MARTIN: Ratha encourages lawmakers to pass legislation that keeps migrants in mind.
RATHA: If we help these people, every dollar that the migrants receive probably then is transmitted over to their own countries and benefits many, many people out there. So the dollar goes a long way in terms of helping.
MARTIN: That was Dilip Ratha, an economist with the World Bank, where he heads the Global Knowledge Partnership on Migration and Development.
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