COVID-19: A Threat to Remittances Endangering Global Food Security

Nicole is a 2020 law degree graduate from the University of Ottawa. This post is the result of her research assistance work for Professor Sarah Berger Richardson, University of Ottawa, Faculty of Civil Law.

Source: https://search.creativecommons.org/photos/0b3e5d48-f88a-4d02-ab42-dc6b6a6986e2

As the world becomes more interconnected, the number of individuals who decide to take a leap of faith and seek better opportunities abroad has considerably increased. For many of these individuals, the departures are done with the intention of sending remittances to their loved ones left behind in what are often dire economic circumstances. Remittances are essential for more than 800 million recipients and make up more than 10% of 30 countries’ gross domestic product (GPD). According to numbers presented by The Economist in a recent article, in the eight countries receiving the largest amounts of money, remittances are the exclusive source of cash for 20% of households.

Currently, the COVID-19 pandemic has placed existing remittance flows under threat. They are expected to fall by about 20% according to the World Bank and Global Knowledge Partnership on Migration and Development (KNOMAD). The main contributing factor is the loss of income currently affecting migrant workers in various sectors. It is reported that 94% of the world’s workforce lives in areas where workplaces were closed in an effort to limit the propagation of the virus. For those taking part in odd jobs or selling products in the streets, generating income has become virtually impossible as lockdowns were put in place and social distancing measures adopted. Travel bans have limited the ability of some seasonal workers to migrate to their host countries. This is without saying that remittance service providers were not considered as essential businesses at the moment of lockdown; a measure that affected the accessibility of their services to customers. This is relevant considering that access to digital channels is not universal as some recipients lack access to bank accounts or financial literacy to use online services. Finally, another preventive element to remittances being sent is the potentially prohibitive costs associated with these transactions.

Adopting national regulations favourable to the growth of remittance flows is essential for several reasons. First, the pandemic has brought to light the essential contributions made by migrant workers in various sectors of our societies. Out of gratitude and recognition for their services, their host countries should enable them to help their loved ones left behind in the process. However, even from a purely economic perspective, remittance flows should be protected as they are highly beneficial for global economic well-being. Indeed, remittances contribute to development to a higher extent than foreign direct investment (FDI) and three times more than foreign aid. Remittances contribute to the reduction of poverty and to a repartition of wealth throughout the world. On average 75% of remittances are used to fulfill basic needs. Considering that world hunger is not due to a lack of food, but to problems of accessibility, favouring a better distribution of wealth is essential especially now when the number of people facing acute food insecurity worldwide could go up from 135 million to 265 million due to the crisis.

Critical situations can often lead to beneficial social change and policy-makers need to enable such reforms. The current situation has led to various solidarity initiatives across the globe in ways previously perceived as impossible. Providing migrant workers with social security measures instead of excluding them from those; facilitating the recognition of foreign qualifications; adopting policies to keep remittance costs low such as tax benefits; recognizing remittance service providers as essential businesses; encouraging digitalization of money transfers and facilitating financial literacy are all crucial tools in the fight against world hunger.

As highlighted above, remittances are essential sources of income for many families in precarious situations. It is essential to facilitate the transfers from those who work abroad to help their loved-ones through the adoption of new National regulations on international financial transfers. This is crucial to help with the recovery from the current crisis as it poses a huge threat to food security around the world. Reforming our global economy in that sense is essential so that realities like acute hunger and food waste by producers stop coexisting. These policies are essential to allow communities to increase their resilience to potential future crises. The COVID-19 pandemic has demonstrated how interconnected we all truly are and it has become very obvious that “no-one is safe until everyone is safe”.