Guyana vulnerable as World Bank projects drastic reduction in remittances

COVID-19 pandemic

The World Bank has projected that in the wake of the coronavirus disease (COVID 19) pandemic, the world will see a drastic reduction in remittances, with the Caribbean being hit with its sharpest decline in remittances in recent history.

This was communicated in a statement on Wednesday, when the World Bank projected a global decline of 20 per cent in remittances owing to the coronavirus sweeping the world and the resulting economic slowdown. In Latin America and the Caribbean, this fall is expected to be some 19.3 per cent.
“The projected fall, which would be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.”
“Remittances to low- and middle-income countries (LMICs) are projected to fall by 19.7 per cent to US$445 billion, representing a loss of a crucial financing lifeline for many vulnerable households,” the report also stated.
The World Bank pointed out that remittances help to ease poverty in low- and middle-income countries, of which Guyana is one. The financial institution also noted that remittances aided in improving access to higher education and reducing child labour in lower income households.
“A fall in remittances affect families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs,” the World Bank also said.
Moreover, World Bank Group President David Malpass was quoted as saying that “Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies.
“Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs,” he was also quoted as saying.
Another risk of the COVID-19 crisis is that it can drive up costs of transferring remittances to the Region owing to operational challenges being faced by service providers. Such challenges include closure of agents and offices, reduced access to cash, foreign exchange and security.
Remittance, the act of overseas-based family members sending home money, plays a big role in the local economy. The Bank of Guyana reported US$327.9 million in remittances for 2018. This amount was US$317.2 million in 2017 and US$264.6 million in 2016.
However, with the coronavirus pandemic, countries around the world have implemented stay-at-home policies. Staying at home and social distancing have been a two-edged sword, reducing the spread of coronavirus but also bringing economies to a halt. There have also been layoffs, including in the United States from where Guyana gets much of its remittances.

Other challenges
As if dealing with the reduction in remittances owing to coronavirus was not enough, Guyana also faces the risk of remittances being curtailed due to sanctions. This is the bleak reality if foreign Governments make good on warnings should Guyana not conclude its elections in a timely and democratic fashion.
It has already been over a month of controversy, and a credible winner of the 2020 General and Regional Elections is yet to be declared. After two declarations from Region Four (Demerara-Mahaica) Returning Officer Clairmont Mingo, which lacked transparency, Opposition Leader Bharrat Jagdeo and caretaker President David Granger had agreed to have the Caribbean Community (Caricom) oversee the recount.
That agreement was derailed when A Partnership for National Unity/Alliance For Change (APNU/AFC) candidate Ulita Moore moved to the courts and secured an injunction against the exercise.
That injunction was discharged by the Full Court, and later the Full Court’s decision was upheld by the Appeals Court. But by then, the Caricom team had long since left. GECOM has since reinvited Caricom, leaving the ball in its court as to when the recount would start.
Financial analyst and former President of the Georgetown Chamber of Commerce and Industry (GCCI), Deodat Indar had recently warned about the effects sanctions can have on Guyana, including the effect on remittances.
Indar, in a recent warning from the business community, said the status quo of a pariah state would attract sanctions in addition to those which have been threatened against individuals that are found to be complicit in electoral fraud.
He had also said that an expulsion of Guyana would lock out the country from accessing finance from international funding agencies such as the World Bank; the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB), among others.