An IMF blog post publicised on 11 September 2020 notes that the COVID-19 crisis has had a disproportionate impact on migrant workers. Although the flow of remittances by migrant workers back to their home countries has been resilient through the crisis, this may not continue and there is a need for government support for the workers and for their families.

Many migrant workers lost their jobs during the crisis and were stranded in their host countries without the financial means to return home. Unemployment is a heavier burden for migrant workers because they often cannot benefit from social safety nets provided by social security laws in the host countries. This is especially the case for undocumented workers or those on temporary visas. They also have limited access to healthcare.

Outlook for remittances

Remittances sent back by foreign workers are an important part of external financing and in 57 countries they exceeded five percent of GDP in 2019. The remittances go mostly to low-income households and are acutely needed especially in the health crisis.

The IMF blog notes that remittances often hold up well in response to adverse shocks in the recipient countries and they have been very resilient in many countries in the first half of 2020. Remittances largely fell from March but started to stabilize in May and began to recover. This pattern generally reflected the changes in virus containment policies in advanced countries where strict lockdowns and other measures were imposed from March 2020 and gradually eased from May onward.

As the needs in the remittance-receiving countries are now greater as they are struggling with the pandemic the migrant workers may be using their savings to remit money. This may not be sustainable over time especially if a second wave of the pandemic occurs later in 2020.

Policy responses

Policy responses are therefore required from the remittance-sending and remittance receiving countries especially in view of the importance of migrant work to the healthcare, agriculture and food processing industries. Host countries could ensure adequate access to healthcare and basic services for the migrant workers.

The home countries of the migrant workers could increase support to vulnerable households by targeted cash transfers and food aid.

Retraining and Access to Credit

Migrants who have to return to their home countries could be given retraining to allow a quick return to the labour market. Access to credit could be eased for returning migrants starting their own businesses.

Use of Digital Technology

Digital technology could be used to reduce the cost of sending and receiving remittances, which was very high at around 7% in the first quarter of 2020. A reduction in these costs would mean that increased funds would reach low income groups.

Regulatory Changes

Regulations could be amended to facilitate flows of money while ensuring that risks of misuse are minimised. Governments could ease the caps on amounts of digital transfers, for example transfers via mobile phones.

Incentives

Bangladesh has introduced a scheme offering a two percent cash back on remittances by the expatriate community.

Countries can also introduce tax incentives to offset a reduction in the fees for remittances. This was done by Pakistan in the financial crisis by the Pakistan Remittance Initiative launched in 2009. Also, governments generally should avoid imposing any taxes on remittances.