Remittance Flows to Low-income Countries May Run Dry and Cause Increased Hardship Amid Coronavirus Outbreak
By Mustapha S. Wai, CPA, Virginia, U.S.A
Unlike during civil wars, drought, famine, Ebola and other national emergencies, remittance to low-income countries in Africa and other parts of the world are about to run dry, thereby compounding hardship during the current Coronavirus outbreak.
Remittance flows, especially during emergencies have historically played a major role in making food and other necessities affordable in many households in low-income countries. Evidence suggest that remittance helps to sustain consumption and investment in recipient economies. In 2019, flows of remittance to low- and middle-income countries was projected to reach $551 billion according to the World Bank — making remittance the largest flow of external financing, trumping foreign aid in majority of these countries. Sub-Saharan Africa accounts for $49 billion of this amount. However, researchers believe that the available data on remittance flows fall short of telling the full story, as informal transfer channels indicate a much larger movement of money than official figures suggest.
The source of remittance flows has been hard-working immigrants living in developed countries — the likes of the United States, United Kingdom, China, France, Germany, and Italy — many of which are now being forced into recession by the Coronavirus. Many immigrants in these countries are currently out of work due to emergency measures in place and paychecks — from which remittance are previously made — are hardly going to come by during these difficult times. According to a leading job website, CareerBuilder, 78% of workers in the U.S. are living paycheck to paycheck. Experts believe that this number may likely be higher among immigrants.
Among the most affected industries are the largest employers of immigrants from low-income countries. Airports which are workplaces for multi-lingua immigrants mainly from low-income countries will see fewer traffic as airlines ground their fleets; Uber and taxi driving which is not only the main source of income for many immigrants, but also substitute income for others will see fewer passengers; hotel industry which boasts of a large number of entry-level jobs attractive to immigrants will see fewer guests; and private households which employ large number of immigrants as domestic workers, childcare providers and home health aides will shelter-in-place themselves and lay off workers to reduce external contacts. Most of these working immigrants are wage earners who get paid only based on the hours they work, and many do not have sick or vacation leave benefits.
Therefore, in the absence of paychecks, immigrants may have bigger problems, like having to deal with falling behind on their bills and struggling to put food on the table for themselves and/or their immediate family members. Unfortunately, recipients of remittance in African countries and other low-income countries around the world will have to look elsewhere for relief. And as the Coronavirus spread across those low-income countries, resulting in restrictions on movement, increase in hardship is likely to become a burden on not only individuals, businesses and communities, but equally their respective governments.
Governments in low-income countries will — perhaps for the first time for many — be forced to stimulate their economies by issuing bailout packages to not only families, but also businesses that are bound to be exposed to economic shocks resulting from the Coronavirus outbreak. This is exactly what developed countries like the U.S , U.K and Canada are getting ready to do. Low-income countries may not afford to be an exception without experiencing serious socio-economic challenges in the near term.
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