Impact of COVID-19 in remittances of South Asian States

Image source: The Nation

The COVID-19 pandemic has been dismantling the countries’ economies. Many countries’ source of income is the flow of remittances from other countries, and these countries are weak or fragile economies. A huge drop in the remittances flow is likely to hit the heart of these economies, in response to which economic, fiscal, and social pressures on governments of these countries already have mounted creating a struggle to cope even in normal times. Shocks to the economies of migrant-host countries, the sorts of shocks being caused by the coronavirus pandemic now can be transmitted to those of the remittance-recipient countries.

World Bank has projected that South Asia will be hit hard by the pandemic, and with remittance declines projected at 22.1%. Remittances have been the core for the South Asian countries, and have been credited for reducing the poverty and uplifting the quality of life of the South Asian people. All the South Asian states send their people to different Gulf countries and countries like Malaysia, the Philippines and others. So, the inflow of remittances to each South Asian country has been affected by the COVID-19 pandemic.

Image source: NYT

What are the situations of each South Asian countries?


The sharp decline in remittances to Afghanistan is having a catastrophic impact on millions of families. A poor and war-torn country is likely to get highly affected due to less flow of money from outside increasing the number of poor, hungry and homeless people in the country. A multi-dimensional crisis in Afghanistan has continued in recent days because of the less economic activities and remittances flow. The socio-economic impact on the Afghan people is likely to increase than other South Asian states because of their poor economy. Many children are likely to die because of hunger and malnutrition due to low family income. The anticipated peace for the Afghani people is also under jeopardy because of the less economic activity in the country, especially because of the low flow of money.


Bangladesh has been a major beneficiary of globalization, and remittance is a feature that greatly shapes the foreign exchange reserve, and in turn the economy of Bangladesh. The annual remittance recorded in the nation rose parallelly with the rise in the number of emigrant workers. It was the third-highest recipient of remittances in South Asia, and the 11th highest recipient globally in 2018, with USD 15.3 billion as reported by the World Bank. The pandemic has taken a toll on the flow of remittances in Bangladesh as well, with a drop from USD 1.63 billion in January to USD 1.45 billion in February 2020. Major contributors to inward remittance in Bangladesh include Saudi Arabia, United States of America, and the United Kingdom. Each of these countries faced major shutdowns brought about by the global pandemic, thus affecting the inflow of remittances. Therefore, a likely fall of about 22% is expected in terms of remittances this year.


Bhutan was one of the nations with larger remittance outflows than inflows until the earlier half of the previous decade. The nation’s economy is based on agriculture and movement of labour abroad is comparatively less. In August 2019, the country’s inward remittances dropped to USD 19 million from USD 39 million in 2018 and a pattern of deterioration was spotted. With a small-sized population and a strong sense of community, Bhutan is one of the most successful nations in the Indian subcontinent in this fight against coronavirus. The national income will likely remain mostly unaffected by remittances than other countries with almost no dependency of remittances to the country. However, the livelihoods of a great majority depend on tourism and allied industries, which is likely to take a huge hit this year, in turn affecting the economy. 

Golden piggy bank with International currencies


India is one of the highest receivers of remittances worldwide, which includes money transfers from non-resident Indians (NRIs) employed abroad to residents living in India, inflows of migrants’ and short-term employee income transfers. As per the estimates of the World Bank’s latest Migration and Development Brief, India is predicted to have a 23% decline in remittances. Inward remittances are expected to drop from USD 83 billion in 2019 to USD 64 billion in 2020, significantly impacting the economy. This global pandemic may also lead to a sharp rise in return migration of unskilled and semi-skilled workers as a result of the global recession. Gravely affected by the pandemic, the Indian economy is expected to contract by 4% during the current financial year.


As the remittances decrease due to the pandemic, Maldives could face an excruciating foreign exchange crunch as the Maldives has a very low foreign exchange reserve. But Maldives’ national income is quiet unaffected of the decrease in remittances than other countries in South Asia because of the less inflow of remittances to the country’s GDP. Other than the remittances, as a sole dependency of a country in tourism is expected to have a significant decline in the GDP growth for the year, the loss is expected to be in the range 11 to 30% with substantial declines in revenues for the Government.


Remittances flow to Nepal represented a quarter of the country’s economy. The World Bank projected that remittances to Nepal will slide by 14% this year. The pandemic has hit hard, and the migrant workers have swapped the risk of death or injury at work with the reality of poverty and homelessness. The unemployment rate has increased, and the decline in the flow of remittances denotes the loss of a very important financing lifeline for the poor Nepalese households resulting in the people falling below the poverty line. The government earning has been affected, which will in future affect the investments in the development projects in Nepal. 


Similarly in Pakistan, remittances make up around 86% of the secondary income balance of the economy of Pakistan. Hence, there has been a huge number of job losses, an increase in the unemployment rate and a large influx of Pakistani migrant workers from destination countries due to the pandemic. There has been a huge layoff of Pakistani workers in the Gulf countries, the tax collection has decreased and due to a decrease in global demand, the workers have not been able to go for work. Millions of workers have returned home without work, and now that they have returned there has been a job crisis and the decrease in the family income have made Pakistani people have a low-quality life compared to before.

Sri Lanka

Sri Lanka is also one of the remittance reliant countries, a tenth of the country’s population and a quarter of the labour workforce is outside the country. As most of the Sri Lankan remittances are spent for the livelihood, very less is spent on the business activities. World Bank has projected a 19% decline in the remittances for Sri Lanka this year. Hence, the pandemic situation has directly affected the grassroots of the country. The heavily remittance reliant country have had to face the similar fate as other South Asian countries, that is, increase in unemployment, growth of people below the poverty line, decrease in quality of life, the decline in earnings and ultimately affecting the national economy.

What can be done to keep remittances flowing?

Remittance services should be supported by a sound, predictable, and non-discriminatory legal and regulatory structure that will lower remittance costs, develop formal channels of cross-border transactions, lessen the decline in remittances, and enlarge the use of digital solutions. More than this, each government in the host country and sending countries should monitor and support the migrant workers.

Each South Asian country should be prepared for potential migrant returnees, create a suitable environment in the home countries to ensure the employment activities for their livelihood. Immediately the states should focus on national employment generation and reduce dependency on remittance flows for later. The government policy responses to the COVID-19 crisis in each South Asian states need to embrace migrant workers in all short, medium and long-term intermediations. The policies should include supporting stranded migrant workers, regularizing remittance inflows, providing recovery support for migrants’ families who have lost their survival income, and guaranteeing reach to basic needs.

Reimagining Human Mobility

“The COVID-19 crisis is an opportunity to reimagine human mobility”

-UN Secretary-General António Guterres

In the launch of a policy brief on the impact of COVID-19 on refugees, internally displaced persons and migrants, UN Secretary-General expressed four core understanding that should guide the way to reimagine human mobility. First, he focused on inclusive public health and socio-economic response to restart the economies, second is upholding human dignity in the time of the pandemic and learn from the states that have shown how to implement travel restrictions and border controls while fully respecting human rights and international refugee protection principles. The third is, he emphasized the accessibility of diagnostic, treatment and vaccines for all. Lastly, removal of unwarranted barriers, exploration of models to normalize paths for migrants and reduce transaction costs for remittances.

Hence, the policy regarding human mobility is a key for the remittance reliant countries, especially South Asia and all the countries in the world expecting a better economic environment amidst the COVID-19 pandemic. 

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The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of The Kootneeti Team

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Abhishree Kashyap Baruah and Manish Jung Pulami

Abhishree and Manish are Interns at The Kootneeti

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