The pandemic has jeopardized a vital artery of global finance: remittances sent home from wealthy countries by migrant workers.
These payments, which support hundreds of millions of families around the globe, total $554 billion last year, more than three times the amount of development aid dispensed by wealthy countries, according to the World Bank.
But as the coronavirus has sent economies into lockdown, people accustomed to taking care of relatives at home have lost their paychecks, forcing some to depend on those who have depended on them. The bank estimates that remittances are likely to plunge by one-fifth this year, representing the most severe contraction in history.
The drop amounts to a catastrophe, heightening the near-certainty that the pandemic will produce the first global increase in poverty since the Asian financial crisis of 1998. Some 40 million to 60 million people are expected this year to fall into extreme poverty, which the World Bank defines as living on $1.90 a day or less.
Less spending in poorer nations spells less economic growth for the world. Developing countries account for 60 percent of the world economy on the basis of purchasing power, according to the International Monetary Fund.
In some countries, migrant workers can tap into unemployment insurance and other government programs. But in many countries, migrants operate in gray areas, unprotected by government relief and especially vulnerable to hard times.
“Some people, either naïvely or with good intentions, say this Covid-19 democratizes us all, and we are all exposed to it equally,” said Mahmoud Mohieldin, an Egyptian economist who serves as a United Nations special envoy on financing sustainable development. “This is not true. The impacts are very much disproportionate.”