Remittances to South Asia resilient despite Covid shock: World Bank

May 14,2021:Remittances to South Asia remained resilient despite a shaky outlook at the outset of the spread of Covid-19, according to the latest data released by the World Bank on Friday. “Inward remittance flows to South Asia rose by about 5.2 percent in 2020 to $147 billion, driven by a surge in flows to Bangladesh and Pakistan. In India, the region’s largest recipient country by far, remittances fell by just 0.2 percent in 2020, with much of the decline due to a 17 percent drop in remittances from the United Arab Emirates, which offset resilient flows from the United States and other host countries,” said the World Bank.

The report further highlighted that in Pakistan, remittances rose by about 17 percent, with the biggest growth coming from Saudi Arabia followed by the European Union countries and the United Arab Emirates.

Remittances are a major source of foreign exchange reserves for under-developing countries including Pakistan. The World Bank in the 1HCY2020 had predicted a steep fall in remittance flows to Pakistan (including South Asia), hinting at a parching of foreign exchange funds for the country. However, against the predictions, inflows have seen a major spike over the last 12 months.

As per the latest data released by the State Bank of Pakistan (SBP), remittances to Pakistan remained above the $2 billion mark for 10 consecutive months in April, 2021. Experts say that the Covid-19 has forced around 8 million Pakistani expatriates across the world to send home inflows through the legal channels. In the pre-Covid-19 days, a large chunk of remittances to Pakistan was sent through illegal channels i.e. Hundi and Hawala. However, with the grounding of flights and social distancing rules in place, the expatriates were forced to send home funds through legal channels thereby increasing the total tally of remittances.

Meanwhile, the SBP has also launched the Roshan Digital Account for overseas Pakistanis allowing them access to local services in Pakistan. So far, non-resident Pakistanis (NRPs) have deposited around $1bn into the Roshan Digital Accounts.

“Despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected. Officially recorded remittance flows to low- and middle-income countries reached $540 billion in 2020, just 1.6 percent below the 2019 total of $548 billion,” according to the latest Migration and Development Brief.

Meanwhile, it added that the average cost of sending $200 to the region stood at 4.9 percent in the fourth quarter of 2020, the lowest among all the regions. Some of the lowest-cost corridors, originating in the GCC countries and Singapore, had costs below the SDG target of 3 percent owing to high volumes, competitive markets, and deployment of technology. But costs are well over 10 percent in the highest-cost corridors.