Remittance inflows to South Asia increase by 8% to $ 159 bn in 2021
After displaying remarkable resilience through one of the sharpest economic downturns in host and home countries in 2020, remittance inflows to South Asia increased by 8 % to $159 billion in 2021. In 2021 remittances were almost three times as large as FDI.
Since 2008 the gap between remittances and all other financial flows combined has systematically widened in South Asia, making remittances the dominant source of foreign exchange for the region In 2021, for every $1 of FDI, South Asia received $2.9 of remittances.
In the International Development Association (IDA) countries of South Asia, for every $1 of ODA in 2020, the region received between $9.2 and $9.8 in remittances, According to the COVID-19 Crisis, According to the estimates of World Bank’s Migration and Development Brief.
In Sri Lanka, the 2020 recovery in remittances was not sustained and inflows dropped 6.2 % to their pre–COVID-19 level of $6.7 billion in 2021, explained mostly by the popularity of informal channels of money transfer.
The outlook for remittances in 2022 ranges from a growth of 7 % in the Maldives to between 1 % to 2 %in Bhutan, Nepal, and Sri Lanka.
The report also highlighted that Sri Lanka’s government has recently announced an initiative to stem the leakage in official remittance channels: SL-Remit hopes to increase the annual inflow of remittances from $7 billion to $9 billion.
In 2021, remittance flows to low- and middle-income countries (LMICs) are projected to reach $589 billion, registering a 7.3 % increase.
The recovery in 2021 follows the resilience of flows seen in 2020, when remittances recorded only a modest 1.7 % decline to $549 billion, in the face of one of the deepest recorded global recessions.
The key contributing factors are that in 2021, the top five remittance recipients in current US dollar terms were India, China, Mexico, the Philippines, and the Arab Republic of Egypt.
The United States was the largest source country for remittances in 2020, followed by the United Arab Emirates, Saudi Arabia, and Switzerland.
The cost of sending money across international borders remained high, around 6.4 % on average in the first quarter of 2021, or more than doubles the SDG target of 3 %. Remittances are expected to continue growing in 2022, but there are downside risks. Moreover, the shift from cash to digital remittance channels which was observed at the peak of the COVID-19 crisis in 2020, has likely run its course. According to the report, further growth will require greater progress in access to bank accounts (which is essential for using digital channels) for migrant populations.