Published on Development for Peace

Remittances to Countries in Fragile and Conflict-Affected Settings Bounce Back in 2022

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Photo: Stuart Price/ AU/UN IST PHOTO through a Creative Commons license. Photo: Stuart Price/ AU/UN IST PHOTO through a Creative Commons license.

More than 1 in 5 international migrants and refugees come from fragile and conflict-affected settings (FCS), where households are more likely to be extremely deprived and dependent on remittances. These are economic lifelines that could buffer to some degree the shocks of reduced income, poor crop harvests, and forced displacement that affect so many of these households.   

According to the latest Migration and Development Brief, in 2022 remittance flows to FCS countries are estimated to be around $70 billion (8.8 percent of GDP), larger than the volume of official aid received by these countries (table 1).  Within this group of countries, remittances to those affected by conflict are estimated to be around $50 billion or 6.3 percent of GDP, and to those living in settings with institutional and social fragility, around $20 billion or 11.4 percent of GDP.  

In Comoros, Haiti, Lebanon, Somalia, and South Sudan, the share of remittances in GDP is well over one-fifth. In Ukraine, the latest country to be added to the FCS list, remittances were more than three times the volume of foreign direct investment in 2021. In Nigeria, remittances (at $21 billion) are the largest source of foreign exchange, after oil exports.  

Table 1: Remittance flows to FCS countries

Table 1: Remittance flows to FCS countries

Source: Migration and Development Brief 37, World Bank-KNOMAD 
Note: Please see the World Bank Group's FCS List. *Ukraine is considered a conflict country in 2022.

Including Ukraine, the FCS countries have seen over 60 million international migrants and refugees voluntarily or involuntarily move to other countries to escape fragility, conflict, and violence (column 1 of table 1). Many of the migrants and refugees, especially those in relatively safer and higher-income countries send money to family members and friends back home who may be facing weak or worsening situations.  

Remittances to FCS countries are expected to have grown by 4.3 percent in 2022, continuing a post-pandemic rebound. To a large extent, in many host countries, healthcare and social protection policies implemented during the pandemic were inclusive of migrants, who were able to continue to support families back home. In the United States, the largest migrant host country in the world, the employment situation for migrants has been strong, enabling the latter to send remittances. In Afghanistan, Congo and Mozambique, growth of remittances was strong, over 20 percent. However, growth of remittances was surprisingly subdued in Ukraine, although it is likely that a significant part of remittances was under-recorded (especially funds hand-carried or sent via informal channels). In Ethiopia and Sudan, there was a sharp decline in remittance flows, in part due to exchange controls and a prevalence of multiple exchange rates that encouraged flows through informal channels.  

Growth in remittance flows to FCS countries is expected to moderate in 2023, as GDP growth in high-income countries continues to slow (from a projected 2.4% in 2022 to 1.1% in 2023) and rising prices erode migrants’ real incomes in host countries. Downside risks are substantial and include uncertain geopolitical situations in FCS countries and economic concerns relating to volatile oil prices and currency exchange rates. For Sub-Saharan Africa, food affordability and deterioration of real incomes across African states indicate the need for financial support. 

Remittance costs. When it comes to sending $200 to FCS countries, the costs of sending remittances were exorbitantly high in many corridors – for example, Saudi Arabia to Syria, the United Kingdom to Afghanistan, South Africa to Nigeria (figure 1). However, in corridors where the host country for refugees provided identification documents and allowed access to remittance services, remittance costs were surprisingly low, for example, Germany to Ukraine (both 2.3 percent on average).  But it costs 14 percent on average to send money from Jordan to Syria, 15.5 percent to send from the United Kingdom to Afghanistan and 35 percent to send from Saudi Arabia to Syria. 

Figure 1: Cost of Sending $200 to FCS Countries 

Figure 1: Cost of Sending $200 to FCS Countries

Source: World Bank Remittance Prices Worldwide database.

Sending money to an FCS country tends to be more costly than sending money to other countries. The regulations to combat money laundering and financing of terrorism (AML/CFT regulations) tend to be more cumbersome in the case of financial flows to FCS countries. Mobile money services tend to be more efficient in providing remittances in FCS settings, but access of such service providers to correspondent bank accounts also tends to be more difficult.  

Host country governments could take medium- to long-term measures to promote economic, social protection and educational investments for migrants and refugees, and recognize how their skills can be most effectively leveraged as part of economic recovery efforts. Also important would be to Improve data on remittances, facilitate digital systems of sending remittances and reduce remittance costs 

FCS countries are recovering from the effects of the pandemic at a slower pace than other countries --which means families who are reliant on remittances remain more dependent than ever on these cash flows to buy food, medicine, and to send their children to school rather than to work. Making sure that this support reaches them is essential to get these communities back on track toward a recovery that is inclusive, resilient and sustainable. 


Authors

Soukeyna Kane

Director, Fragility, Conflict and Violence Group

Dilip Ratha

Lead Economist and Economic Adviser to the Vice President of Operations, Multilateral Investment Guarantee Agency, World Bank

Michal Rutkowski

Global Director for Social Protection and Jobs, World Bank

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