Remittances in the UAE have recently dropped to record lows amid job losses and growing uncertainty.
Outbound money transfers during the coronavirus pandemic, particularly from March to June, dropped by 40 percent when compared to the same period last year, according to Rajiv Raipancholia, treasurer of the Foreign Exchange and Remittance Group (FERG), and chief executive officer (CEO) and managing director of Orient Exchange.
“We have seen a reduced number of transactions these past few months. This is because of job losses, reduced salaries and also due to unpaid leave,” Raipancholia told Zawya.
"[The 40 percent] decline is in terms of our institution, Orient Exchange. [That's] what we have seen in figures," he added.
Expatriates in the UAE and around the world send billions of US dollars per year, a huge chunk of which serves as a lifeline to a significant number of poor and vulnerable families. Experts had forecast that the amount of money that these workers remit back to their home countries will drop as a result of the pandemic.
The World Bank predicted that global remittances could fall sharply by about 20 percent in 2020, the sharpest decline in recent history.
“[The decline] 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,” the World Bank said.
In the UAE, remittance transactions were noticeably slow when people were told to stay home in March, although exchange houses around the country continued to operate.
Uptick, recovery prospects
Raipancholia said money transfer activity has only recently started to pick up, with transactions in July and August growing by 20 percent compared to the transactions between March and June, as businesses have reopened and restrictions are eased.
“In the months of July and August, we are seeing a decent growth in numbers, but still there is a drop when compared to last year by 15 percent to 20 percent” Raipancholia told Zawya.
“The remittance figures have improved since the past two months. Markets are opening up [and] have helped accelerate the numbers,” he added.
Transactions have also shifted online, he noted, with the digital channels seeing a 30 percent increase in transactions in the past four months.
He also highlighted that the recovery in the money transfer business might take a while, probably in the middle of next year.
“Travel restrictions will need to be lifted but this will take time. Corporate confidence needs to improve. We can see that markets have opened up and everything seems to be moving in the right direction. Possibly, [in the] second quarter of 2021, [the] remittance volumes would return to pre-COVID-19 levels,” he added.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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