The COVID-19 pandemic is wreaking economic havoc around the world. African governments, in particular, are faced with huge budgetary constraints due to the economic slowdown, a dramatic drop in commodity prices, the flight of foreign capital and the need to meet debt repayment. The UN Economic Commission for Africa has predicted that Africa’s economy could contract by up to 2.6% in 2020.
Across the African continent, families and individuals bearing the brunt of the economic shock are squeezed on both sides. On the one hand, limited economic and social support from their government, and on the other, the sudden loss of additional income. Remittances inflow to the African continent could decline by 21% – or 18 billion dollars – in 2020 alone. While many African governments have rolled out support for people reliant on remittances – such as waiving international money transfer fees and facilitating mobile money transfer – much more needs to be done.
To increase remittances during the COVID-19 crisis:
- Finance ministers of the Group of 20 should amend their national remittance plans, along with relevant bank regulations, to reduce the cost of sending remittances to close to zero until the pandemic ends, and thereafter ensure that remittance costs do not exceed 3 per cent, as agreed in Sustainable Development Goal 10.
- Governments should promote the digitization of the remittance value chain from sender to receiver to help increase volumes, reduce costs and enhance the convenience of sending money.
- Governments should offer tax incentives to remittance service providers to lower fees, along with relaxing stringent “know your customer” requirements for smaller transactions.
- All countries should include migrant workers in social protection and stimulus programmes and extend visas so that migrants can continue to work and send money to their countries of origin.
- Governments should allow money operators to be classified as essential businesses so that they can remain in operation during lockdowns.
- Governments in low- and middle-income countries should establish or strengthen safety nets for rural households that rely heavily on remittances.