There has been an unprecedented decline in the flow of remittances to Rwanda – a vibrant source of money for a section of Rwandan– just as cases of coronavirus surge worldwide and the country grapples with the pandemic.
Remittance inflows to Rwanda decreased by 16 per cent in March from Rwf22.5 million, according to the latest data from the National Bank of Rwanda (BNR).
In March this year, remittance inflows recorded in Rwanda stood at Rwf18.9 million compared to Rwf22.5 million recorded during the same period in 2019, a drop that could be attributed to Covid-19.
“We continue to monitor the trend in April 2020 to see if the drop realized in March 2020 persists and if so, it will affirm Covid-19 effect,” an emailed response from the Central Bank to this publication read.
This is because some of the largest remittance sending countries – such as the US and Germany – have locked down in an effort to reduce the impact of the virus, leaving many migrants unable to work.
In the first three months of this year (January – March), diaspora remittance inflows to Rwanda rose by 1 per cent to Rwf63.1 million from Rwf62.55 million in 2019.
On average, migrants send home 15 per cent of their earnings, with one in nine people or around 800 million people on the receiving end of these flows, according to the UN Department of Economic and Social Affairs.
The Covid-19 has exacerbated the inflows of remittances to low and middle income countries, generally because incomes have shrunk.
But even in cases where migrants have money to send home, it has become more difficult to do so — around 80 per cent of remittances are sent physically via a Remittance Service Provider, but these money transfer networks have partially or totally shut down.
On April 22 the World Bank predicted that remittances to low and middle-income countries would see the sharpest decline in recent history this year, falling by 19.7 per cent to around $445 billion, compared to $554 billion in 2019.
The fall is expected to disproportionately affect emerging economies, which are the greatest recipients of these inflows and whose citizens rely on them to varying extents for a basic income.
David Malpass, the President of the World Bank Group, said in a statement released on April 22 that 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,” he noted.
Given that foreign direct investment flows to emerging markets are expected to fall even further than remittances this year, by around 35 per cent, the proportional reliance of some economies on remittances as sources of foreign currency may be even more prominent.
In May this year, the World Bank Group predicted a drastic drop in remittances based on projections of 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) was projected to fall by 19.7 per cent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
This is an issue of concern as remittances are important in alleviating poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education. A fall in remittances affect families’ ability to spend on key areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
Experts say that the decline in remittances calls for increased social protection efforts especially to safeguard vulnerable members of societies.
The large decline in remittances in 2020 comes after remittances to lower- and middle-income countries, reached a record $554 billion in 2019.
In 2021, the World Bank estimates that remittances will recover and rise by 5.6 per cent to $470 billion.
Remittances to Sub-Saharan Africa which registered a small decline of 0.5 percent to $48 billion in 2019 will decline by 23.1 per cent to reach $37 billion in 2020, while a recovery of 4 percent is expected in 2021.Follow https://twitter.com/Julio_Bizimungu