May 6, 2020

Remittances from Diaspora to Drop by Over 20% Due to COVID-19

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Inside a conference hall in Bonn, Germany where up to 3,000 Rwandans converged for Rwanda Day in October last year

Due to the COVID-19 crisis, remittance flows from Rwandans are expected to decline by up to 23 percent, a trend to be witnessed not only to this region, but globally.

The World Banks latest update issued late April shows that 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.

On a regular basis, Rwandans send small amounts as low as $200 back home every month to cater for their families. Others send relatively huge sums for development projects like building a home or maintain a business at home.

Studies globally show that remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labor in disadvantaged households. A fall in remittances affect families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.

In 2017, remittances to Rwanda reached $184m, and said to have risen to more than $260m the following year. The figures for 2019 are yet to be available, but likely rose slightly.

According to World Bank data, between 2013-2018, Rwandans sent back home a whooping $1.13 billion.

While Foreign Direct Investment (FDI) into Rwanda grew to $1.2 billion in the same period. In otherwords, the cash that Rwandans sent home during the five year period is nearly equal to the investments – indication of how crucial Rwandan diaspora is to the country’s economy.

“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 World Bank Group President David Malpass. “Remittances help families afford food, healthcare, and basic needs.”

The anticipated decline can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where Rwandans and other African migrants reside including in the EU area, the United States, the Middle East, and China. These large economies 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.

In addition to the pandemic’s impact, many countries in the Eastern Africa region are experiencing a severe outbreak of desert locusts attacking crops and threatening the food supply for people in the region.

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