Month: May 2022

Through multiple transformative actions, the African Development Bank Group has become an indispensable development partner for Sahel countries facing enormous challenges. Support for the Sahel region, in areas including infrastructure, women’s empowerment and climate change adaptation, is in line with the priorities set by the Bank, focusing on the Sahel’s significant opportunities in order to help it realize its potential for development.

“The Bank Group has a deep knowledge of the region’s challenges and is taking every opportunity to strengthen resilience, develop high-quality infrastructure, support the private sector to create millions of jobs for young people and empower women,” said Marie-Laure Akin-Olugbade, the Bank’s Director-General for West Africa.

Over the years, the Bank Group has broadened its scope of action and tailored its response to the needs of the region. The Group’s priority areas of engagement in the Sahel are: resilience and the fight against fragility, infrastructure development, food security, youth employment, women’s empowerment, adaptation to climate change, refugee assistance, governance, regional integration, and the fight against coronavirus.

In recent years, the Bank Group has used its concessional financing window, the African Development Fund, to provide sustained and diversified support to Sahelian countries’ development programmes. As of 30 September 2020, its portfolio in the G5 Sahel countries comprised 105 projects with total commitments of $3.2 billion.

Strong response to Covid-19

In response to the Covid-19 pandemic, the African Development Fund has helped these countries to mitigate the health, social and economic consequences and has supported their economic recovery plans. For example, the Fund provided $285 million in targeted emergency budget support and a $20-million grant to Burkina Faso, Chad, Mali, Mauritania and Niger.

The African Development Bank is a founding member of the Sahel Alliance(link is external), along with the World Bank, the European Union, the United Nations Development Programme, France and Germany. The Sahel alliance, which receives decisive support from the Bank, aims to provide an appropriate and effective response in six priority sectors: education and youth employment, agriculture, rural development, food security, energy and climate, and internal security.

The Bank’s contributions include the financing of the Priority Investment Programme (PIP) developed by the G5 Sahel Executive Secretariat.

At the Summit for Heads of State of the G5 Sahel held in Ouagadougou in September 2019, Bank President Dr Akinwumi A. Adesina launched the “Desert to Power” initiative to produce 10 gigawatts of solar energy by 2030 to provide electricity to 250 million people in 11 countries of the Sahel.

Many programmes are underway as part of this initiative. In Chad, for example, multi-party funding is enabling construction of the Djermaya solar power plant. The funding was realized thanks to the catalysing action of the Bank, which is also providing the project with a partial risk guarantee. The 34-megawatt power plant will provide 10% of the energy supplied to the interconnected system and will prevent more than 45 kilotonnes of CO2 emissions.

Solar power plants in Burkina Faso

In Burkina Faso, the Yeleen project, which benefits from €48.82 million ($51.35 million) in Bank funding, is enabling the development of solar power plants and the strengthening of the national electrical network. This project includes the construction of four solar photovoltaic power plants in four cities: Ouagadougou (Centre), Dori (North), Diapaga (East) and Gaoua (South-west) connecting 30,000 households, or more than 200,000 people, to the power grid. Dozens of educational, apprenticeship and technical and vocational training centres located in the project areas will also gain access to electricity that will improve their operations.

As part of its support to fragile states, the Bank Group is pushing ahead with transformative programmes. In Niger, the Bank is contributing $130 million to the flagship Kandadji Dam construction programme, for which it is the lead technical and financial partner. At a cost of approximately $1.2 billion, Kandadji is an integrated and strategic national and cross-border programme that will transform the lives of more than three million direct beneficiaries and contribute to a marked improvement in the living conditions of 10 million people.

In Mali, the African Development Fund is financing the Socio-Economic Reintegration Support Project for the Population of Northern Mali, which will benefit 635,000 people, at a total investment cost of 8.5 billion CFA francs ($13.6 million).

Drought and insecurity

The Bank is also helping with women’s empowerment, with direct projects and through credit lines to financial institutions. Support for the private sector and state institutions is also essential for strengthening governance in this fragile region.

The economy of the Sahel is constantly challenged by the effects of climate change, with droughts and floods that undermine people’s livelihoods and further accentuate already-precarious living conditions. This situation fuels community conflicts, migration, terrorism, maritime piracy and trafficking of all kinds. Young people, (65% of the population of the Sahel) facing unemployment are particularly exposed to these scourges. To help countries in the region address these challenges, the African Development Bank Group has provided more than $2.1 billion over the past decade to support the work of the Permanent Interstate Committee for Drought Control in the Sahel, which includes the G5 Sahel countries.

Through the African Fragility and Resilience Strategy and the Transition Support Facility as a financing instrument, the Bank Group will continue to prioritize the Sahel, increasing its support to fragile countries in the region. The aim is to strengthen their resilience, to lay the foundations for sustainable peace and to achieve the twin strategic objectives of inclusive and green growth and reducing extreme poverty. The African Development Bank Group is working for a prosperous, stable and resilient Sahel.

Source: African Development Bank

WASHINGTON, Officially recorded remittance flows to low- and middle-income countries (LMICs) are expected to increase by 4.2 percent this year to reach $630 billion. This follows an almost record recovery of 8.6 percent in 2021, according to the World Bank’s latest Migration and Development Brief released today.

Remittances to Ukraine, which is the largest recipient in Europe and Central Asia, are expected to rise by over 20 percent in 2022. However, remittance flows to many Central Asian countries, for which the main source is Russia, will likely fall dramatically. These declines, combined with rising food, fertilizer, and oil prices, are likely to increase risks to food security and exacerbate poverty in many of these countries.

“The Russian invasion of Ukraine has triggered large-scale humanitarian, migration and refugee crises and risks for a global economy that is still dealing with the impact of the COVID pandemic,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank. “Boosting social protection programs to protect the most vulnerable, including Ukrainians and families in Central Asia, as well as those affected by the war’s economic impact, is a key priority to protect people from the threats of food insecurity and rising poverty.”

During 2021, remittance inflows saw strong gains in Latin America and the Caribbean (25.3 percent), Sub-Saharan Africa (14.1 percent), Europe and Central Asia (7.8 percent), the Middle East and North Africa (7.6 percent), and South Asia (6.9 percent). Remittances to East Asia and the Pacific fell by 3.3 percent; although excluding China, remittances grew 2.5 percent. Excluding China, remittance flows have been the largest source of external finance for LMICs since 2015.

The top five recipient countries for remittances in 2021 were India, Mexico (replacing China), China, the Philippines, and Egypt. Among economies where remittance inflows stand at very high shares of GDP are Lebanon (54 percent), Tonga (44 percent), Tajikistan (34 percent), Kyrgyz Republic (33 percent), and Samoa (32 percent).

“On the one hand, the Ukraine crisis has shifted global policy attention away from other developing regions and from economic migration. On the other hand, it has strengthened the case for supporting destination communities that are experiencing a large influx of migrants,” said Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD. “As the global community prepares to gather at the International Migration Review Forum, the creation of a Concessional Financing Facility for Migration to support destination communities should be seriously considered. This facility could also provide financial support to origin communities experiencing return migration during the COVID-19 crisis.”

Globally, the average cost of sending $200 was 6 percent in the fourth quarter of 2021, double the SDG target of 3 percent, according to the Bank’s Remittances Prices Worldwide Database. It is cheapest to send money to South Asia (4.3 percent) and most expensive to send to Sub-Saharan Africa (7.8 percent).

The costs of sending money to Ukraine are high (7.1 percent from Czech Republic, 6.5 percent from Germany, 5.9 percent from Poland, and 5.2 percent from USA). The global goodwill towards refugees and migrants from Ukraine opens an opportunity to develop and pilot programs to facilitate their access to jobs and social services in host countries, apply simplified anti-money laundering and counter-terrorist financing procedures for small remittance transactions to help reduce remittance costs and mobilize diaspora bond financing.

The war in Ukraine has also affected the international payment systems with implications for cross-border remittance flows. The exclusion of Russia from SWIFT has added a national security dimension to participation in international payments systems.

“Lowering remittance fees by 2 percentage points would potentially translate to $12 billion of annual savings for international migrants from LMICs, and $400 million for migrants and refugees from Ukraine,” added Ratha. “The cross-border payment systems, however, are likely to become multipolar and less interoperable, slowing progress on reducing remittance fees.”

World Bank Launches International Working Group to Improve Data on Remittances

The COVID-19 pandemic and the war in Ukraine have further highlighted the need for frequent and timely data. In April, the World Bank, under the auspices of KNOMAD and in collaboration with countries where remittances provide a financial lifeline, launched an International Working Group to Improve Data on Remittance Flows. Having improved data on remittances can directly support the Sustainable Development Goal indicators on reducing remittance costs and help increase the volume of remittances. This will also support the first Objective of the Global Compact on Migration, to improve data.

Regional Remittance Trends

Remittance flows to the East Asia and Pacific region fell 3.3 percent following a 7.3 percent drop in 2020. Flows reached $133 billion in 2021, close to 2017 levels. Excluding China, remittances to the region grew by 2.5 percent in 2021. Remittances to the Phillipines benefitted from job creation and wage gains in the United States where a large number of Filipino migrants live. Among economies where remittance inflows constitute a high percentage of their GDP are Tonga, Samoa, the Marshall Islands, the Philippines, and Fiji. Excluding China, remittance inflows are projected to grow by 3.8 percent in 2022. The average cost of sending $200 to the region fell to 5.9 percent in the fourth quarter of 2021 compared to 6.9 percent a year earlier.

Remittance inflows to Europe and Central Asia increased by 7.8 percent in 2021, reaching historic highs of $74 billion. The growth was due in large part to stronger economic activity in the European Union and rebounding energy prices. In 2021, Ukraine received inflows of $18.2 billion, driven by receipts from Poland, the largest destination country for Ukrainian migrant workers. Personal transfers constitute a vital source of finance and growth for the economies of Central Asia, for which Russia is the prime source. As a share of GDP, remittance receipts in Tajikistan and the Kyrgyz Republic were 34 percent and 33 percent respectively in 2021. Near-term projections for remittances to the region, which are expected to fall by 1.6 percent in 2022, are highly uncertain, dependent on the scale of the war in Ukraine and the sanctions on outbound payments from Russia. By contrast, remittance flows to Ukraine are expected to increase by over 20 percent in 2022. The average cost of sending $200 to the region fell to 6.1 percent in the fourth quarter of 2021 from 6.4 percent a year earlier.

Remittance flows to Latin America and the Caribbean surged to $131 billion in 2021, up 25.3 percent from 2020 due to the strong job recovery for foreign-born workers in the United States. Countries registering double-digit growth rates included Guatemala (35 percent), Ecuador (31 percent) Honduras (29 percent), Mexico (25 percent), El Salvador (26 percent), Dominican Republic (26 percent), Colombia (24 percent), Haiti (21 percent), and Nicaragua (16 percent). Recorded flows to Mexico include funds received by transit migrants from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba, and others. Remittances are important as a source of hard currency for several countries for which these flows represent at least 20 percent of GDP, including El Salvador, Honduras, Jamaica, and Haiti. In 2022, remittances are estimated to grow by 9.1 percent, though downside risks remain. The average cost of sending $200 to the region was mostly unchanged at 5.6 percent in the fourth quarter of 2021 compared to a year earlier.

Remittances to the developing countries of the Middle East and North Africa region grew by 7.6 percent in 2021 to $61 billion, driven by robust gains into Morocco (40 percent) and Egypt (6.4 percent). Factors supporting the flows were economic growth in host countries in the European Union as well as transit migration which further boosted inflows to temporary host countries such as Egypt, Morocco, and Tunisia. In 2022, remittance flows will likely ease to a 6 percent gain. Remittances have long made up the largest source of external resource flows for developing MENA—among ODA, FDI, and portfolio equity and debt flows—accounting for 61 percent of total inflows in 2021. The cost of sending $200 to MENA fell to 6.4 percent in the fourth quarter of 2021 from 6.6 percent a year ago.

Remittances to South Asia grew 6.9 percent to $157 billion in 2021. Though large numbers of South Asian migrants returned to home countries as the pandemic broke out in early 2020, the availability of vaccines and opening of Gulf Cooperation Council economies enabled a gradual return to host countries in 2021, supporting larger remittance flows. Better economic performance in the United States was also a major contributor to the growth in 2021. Remittance flows to India and Pakistan grew by 8 percent and 20 percent, respectively. In 2022, growth in remittance inflows is expected to slow to 4.4 percent. Remittances are the dominant source of foreign exchange for the region, with receipts more than three times the level of FDI in 2021. South Asia has the lowest average remittance cost of any world region at 4.3 percent, though this is still higher than the SDG target of 3 percent.

Remittance inflows to Sub-Saharan Africa soared 14.1 percent to $49 billion in 2021 following an 8.1 percent decline in the prior year. Growth in remittances was supported by strong economic activity in Europe and the United States. Recorded inflows to Nigeria, the largest recipient country in the region, gained 11.2 percent, in part due to policies intended to channel inflows through the banking system. Countries registering double-digit growth rates include Cabo Verde (23.3 percent), Gambia (31 percent), and Kenya (20.1 percent). Countries where the value of remittance inflows as a share of GDP is significant include the Gambia (27 percent), Lesotho (23 percent), Comoros (19 percent), and Cabo Verde (16 percent). In 2022, remittance inflows are projected to grow by 7.1 percent driven by continued shift to the use of official channels in Nigeria and higher food prices – migrants will likely send more money to home countries that are now suffering extraordinary increases in prices of staples. The cost of sending $200 to the region averaged 7.8 percent in the fourth quarter of 2021, a small decline from 8.2 percent a year ago.

Source: World Bank