Word Smith: Remittance

Word Smith: Remittance

The Wall Street Journal had an article about the impact of the novel Corona virus which shocked and amazed me (July 6, 2020) [1]. Citing the remittance of over $554B flowing from G-8 countries and going to developing countries annually, the virus has halted the lion’s share of those dollars. These dollars are earned by migrant workers who send them back to families in their native countries. The payment interruption extracts lethal collateral damage to those weaker economies. Families already on the brink of missing payments for rent, medical care, fuel, utilities and food are “ruptured” by the drop in income. [2]

To put these dollars in perspective, that sum is half a trillion dollars ($.55T) = $550,000,000,000. Any way you write it or say it, that is a lot of zeros. And the World Bank claims that these dollars surpass by three fold the amount of development aid that annually comes from foreign governments. The total decline of inflows to these foreign countries is four times the drop after the 2008 market crash and the largest drop since the World Bank has been keeping track of such payment flows (the 1980’s).

Countries like El Salvadore, Bangladesh, Guatemala, Egypt, Mexico, Pakistan and the Philippines are losing billions in remittance amounts every month. The article in the WSJ goes into detail on the impact to Filipinos where remittances total $35B and they account for 10% of the countries GDP. Close to 40% of those dollars come from the US. Those are staggering stats that caught my attention.

Put into context of a “normal crisis,” when times are tough, foreign workers tend to put aside more money and send a larger portion of their income to their families at home. This time around the experts are predicting up to a 20% drop in that flow of funds. However you slice it, the drop in funding will have a major impact on developing countries which can least afford the decrease. The loss of funds will affect the lives of millions of people and cut deep grooves across the globe.

[1] Emont, Jon, Countries Lose Billions Sent Home From Workers Abroad, The Wall Street Journal, July 6, 2020, page A1.

[2] According to Dilip Ratha, the lead economist on remittances at the World Bank.