Due to the COVID-19 crisis, remittance flows to the region are expected to decline by 23.1 percent to reach $37 billion in 2020
As Somalia struggles to contain a fast-spreading COVID-19 which threatens to erode gains made in the recovery process, one of the country’s engines of growth-remittances is taking a hit as Somalis in the West and Middle who pump in close to $2billion annually to the economy have also been adversely affected by the global pandemic.
The World Bank has warned global remittances to low-income countries such as Somalia are projected to fall by 20% ‘due to the economic crisis induced by the COVID-19 pandemic and shutdown.’ Somalia has since recorded 286 COVID-19 cases and 13 deaths.
“The projected fall, which would be the sharpest decline in recent history, is largely due to 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,” the global lender said.
Sub-Saharan Africa will be most hit, the World Bank warns noting remittances to the region will decline by 23.1% to reach $37 billion. Remittances to the region declined by a small margin of 0.5 percent to $48 billion in 2019.
“The anticipated decline can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where African migrants reside including in the EU area, the United States, the Middle East, and China,” World Bank said in a statement Wednesday.
The lender noted these large economies in the West and Asia ‘host a large share of Sub-Saharan African migrants and combined, are a source of close to a quarter of total remittances sent to the region.’
World Bank President David Malpass the COVID-19 pandemic is causing severe effects on remittances that support millions in 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,” said Malpass.
“Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs.”
The situation East Africa and Somalia in particular could worsen owing to the locust invasion which has destroyed hundreds of thousands of farmlands. According to the Food and Agriculture Organisation (FAO), the locust invasion affected 360,000 hectares of farmlands in Somalia from mid last year.
A second wave of locust invasion is expected through June according to FAO which predicts a 400-fold increase of the insects.
The World Bank estimates as of 2016 Somali diaspora remit at least $1.4 billion annually supporting 23% of the country’s Gross Domestic Product. This surpasses aid donations from the international community.
By T. Roble