Lifelines in Danger

Credit: URDEE IMAGE/ZUMA WIRE/ALAMY LIVE NEWSBy Antoinette Sayeh and Ralph ChamiJun 4 2020 (IPS) The COVID-19 pandemic is crippling the economies of rich and poor countries alike. Yet for many low-income and fragile states, the economic shock will be magnified by the loss of remittances—money sent home by migrant and guest workers employed in foreign countries. Remittance flows into low-income and fragile states represent a lifeline that supports households as well as provides much-needed tax revenue. As of 2018, remittance flows to these countries reached $350 billion, surpassing foreign direct investment, portfolio investment, and foreign aid as the single most important source of income from abroad (see Chart 1). A drop in remittance flows is likely to heighten economic, fiscal, and social pressures on governments of these countries already struggling to cope even in normal times. Remittances are private income transfers that are countercyclical—that is, they flow from migrants into their source country when that country is experiencing a macroeconomic shock. In this way, they insure families back home against income shocks, supporting and smoothing their consumption. Remittances also finance trade balances and are a source of tax revenue for governments in these countries that rely on value-added tax, trade, and sales taxes (Abdih and others 2012). In this pandemic, the downside effect of remittances drying up calls for an all-hands-on-deck response—not just for t...
Source: IPS Inter Press Service - Health - Category: International Medicine & Public Health Authors: Tags: Aid Economy & Trade Financial Crisis Global Headlines Health Humanitarian Emergencies Labour Migration & Refugees TerraViva United Nations Source Type: news