14 May 2021 09:38 am Views - 194
The World Bank (WB) projects that the inward remittance flows to South Asia will slow slightly to 3.5 percent year-on-year (YoY) this year, after rising by around 5.2 percent YoY in 2020, defying the predictions.
“It is projected that remittances to the region will slow slightly to 3.5 percent, due to a moderation of growth in high-income economies and a further expected drop in migration to the GCC countries,” the WB said in a new report titled ‘Resilience COVID-19 Crisis Through A Migration Lens’, under the Migration and Development series, released this week.
In 2020, defying the predictions issued by the WB and other multilateral agencies, the inward remittance flows to South Asia rose by about 5.2 percent to US $ 147 billion, driven by 17 percent, 18.4 percent and 5.8 percent YoY growths recorded in Pakistan, Bangladesh and Sri Lanka, while the remittance inflows to India and Nepal declined less than initially anticipated.
“Contrary to expectations, while the number of outbound migrant workers declined due to the COVID-19 pandemic, recorded remittances to the region remained resilient, perhaps partly due to a shift from informal to formal remittance channels (given restrictions on international travel), additional transfers to support families and friends in need (countercyclicality) and returning migrants choosing to make bulk transfers of savings. It is also possible that the greater use of digital money transfer mechanisms, due to drops in transaction costs and changes in tax policy on remittances, may have encouraged a greater volume of remittances,” the WB reasoned.
Bangladesh and Pakistan, which saw the highest surge of flows last year, had introduced new remittance tax incentives in 2019 and 2020, respectively. Sri Lanka also offered incentives to encourage remittance inflow. The government launched a new scheme, where migrant workers will receive an additional Rs.2 per every US dollar remitted and converted to rupees.
The government is targeting at least US $ 7.5 billion in worker remittances this year, after achieving US $ 7.1 billion last year. This year’s target has been further upgraded to US $ 8 billion, with the authorities growing more optimistic. Sri Lanka’s dependency on remittance inflows in terms of GDP was the third highest at 8.8 percent in 2020, after India and Pakistan. The WB expects that the volume of remittances to Bangladesh, Pakistan and Sri Lanka to be sustained, despite growing at a slower rate this year.
For the first quarter of this year, Sri Lanka received workers’ remittances to the tune of US $ 1.87 billion, up 16.7 percent YoY.