Coronavirus crisis shrinks remittances to Pacific islands
Most Pacific island countries may have dodged the Covid-19 pandemic, but they are not spared from the global economic impact of the coronavirus crisis, which has caused shrinkage to their cash streams from overseas remittances.
Remittance inflows to Pacific island countries are projected to drop by about 13 percent as a result of economic recession caused by Covid-19, according to the World Bank.
“Several remittance-dependent countries such as those in the Pacific Islands could see households at risk as remittance incomes decline over this period,” the World Bank report says.
Remittances represent a main source of foreign exchange in countries such as Tonga, Samoa, Kiribati, Fiji and Tuvalu. In Tonga, remittances represent some 38.5 percent of the GDP, the highest proportion in the world. In Sāmoa, remittances accounted for 16.2 percent of GDP last year, and 14.3 percent in the Marshall Islands. Fiji registered 5 percent of its GDP to remittance payments in 2019. Nearly 10,000 workers from Pacific nations work in New Zealand as part of the Recognized Seasonal Employer program.
The economic pause has resulted in job cuts and most migrant workers do not receive financial support from their host governments, making it hard for them to send money home.
“A recent survey of migrant workers in New South Wales, Australia, found that half had lost their jobs and one-fifth had seen their work hours reduced while none would be eligible for government assistance,” the report states.
The Pacific Island Forum Secretariat is calling on policymakers, regulators and remittance service providers to improve migrants’ access for sending and receiving remittances, and to reduce transfer costs during the ongoing COVID-19 pandemic. ADVERTISEMENT
PIFS said the call to action is to dismantle the obstacles that migrants and their families face when sending and receiving money, so that they can continue to cover basic needs and services such as food, housing, education and health care.
“The Pacific depends on only a few sectors and sources for economic growth and incomes for their communities, including exports, tourism, fishery and remittances. Remittances are an important source of income for families and foreign exchange reserves for governments. It also provides an important buffer in periods of economic shocks and natural disasters,” said Dame Meg Taylor, secretary general of the PIFS.
The Forum highlighted two areas of particular concern: *Money Transfer Operators (MTOs) provide safe, reliable and affordable remittance channels. However, many MTOs were already struggling to maintain services and closing before Covid-19, and many more can be expected to do so. This is due to stringent legislations by the commercial banks they rely on to transact funds across borders. Their closure will increase costs and limit access to services and remittances inflows to the Pacific. *The Pacific remittances corridors are among the most expensive in the world. The cost of sending remittance to the Pacific remains higher than the global average. Continuous effort is therefore required for the cost of remittances into the Pacific to be reduced to the global target of 3 percent set as a target for Sustainable Development Goal 10: Reducing inequality within and among countries.