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Remittances to Sub-Saharan Africa (SSA) are expected to decline by 23.1 per cent to reach $37 billion in 2020, due to the effect of COVID-19 pandemic and shutdowns, according to a new report released today by the World Bank. The multilateral development bank said such a sharp decline in remittance flows would represent a loss of a crucial financing lifeline for many vulnerable households.

The report also shows that remittance flows are expected to fall across all the World Bank regions, with SSA experiencing the second highest decline after Europe and Central Asia where remittances are predicted to fall by 27.5 per cent. The decline in remittance flows to South Asia is expected to be 22.1 per cent, the Middle East and North Africa (19.6 per cent), Latin America and the Caribbean (19.3 percent), and East Asia and the Pacific (13 percent).

COVID-19, a deadly respiratory illness caused by a coronavirus, has affected over 2.5 million people in 210 countries and territories around the world, causing nearly 180,000 deaths as of Wednesday. The disease has caused the unprecedented lockdown of economies to curb the spread of infections.

The World Bank said remittances to low and middle-income countries (LMICs) are projected to fall sharply by 19.7 per cent to $445 billion this year due to the economic crisis induced by the COVID-19, which has caused a fall in the wages and employment of migrant workers in host countries. The projected fall in remittances would be the sharpest decline in recent history.

The Bank said a large share of SSA migrants reside in the United States, European Union area, the Middle East, and China, which are among the economies with the most COVID-19 cases. They are also the source of close to a quarter of total remittances sent to Sub-Saharan Africa. The African Union said only 20 per cent of African migrants actually leave the continent. According to Mo Ibrahim Foundation's Forum Report, 53.4 per cent of all African migrants stayed in Africa in 2017, while 25.7 per cent travelled to Europe and 12.2 per cent to Asia.

According to the new World Bank report, a 4 per cent recovery in remittances to SSA is expected in 2021. The region had recorded a slight decline of remittances by 0.5 per cent to $48 billion in 2019.

Despite the projected decline in remittances, the World Bank said remittance flows are expected to become even more important as a source of external financing for LMICs as the fall in foreign direct investment is expected to be larger (more than 35 per cent).

The World Bank also said SSA has the highest average cost of sending $200 to the region at about 8.9 per cent of the amount in the first quarter of 2020. The is slightly lower compared with the average cost of 9.25 per cent a year before. Globally, the average cost of sending $200 was at 6.8 per cent in Q1 2020, slightly below the previous year, even though it remains high.