WB predicts sharpest remittance crisis in CIS countries

World Bank analysts said that problems with money transfers from Russia threaten the incomes of the countries of Central Asia and the Caucasus and threaten to reduce the confidence of developing countries in international transfer systems (including SWIFT), Spot reports citing kommersant.ru.

In particular, the World Bank predicts that in 2022 cash flows to low- and middle-income countries in Europe and Central Asia will decrease by 1.6% after rising by 7.8% in 2021.

According to WB calculations, anti-Russian sanctions and the crisis in Ukraine will lead to a decrease in remittances by 21% in Uzbekistan, by 32% in Kyrgyzstan, by 22% in Tajikistan and by 19% in Armenia.

Tajikistan and Kyrgyzstan, which rank 3rd and 4th in the world in terms of the share of external remittances in GDP (34% and 33% respectively), will be particularly affected.

The WB forecast for Russia’s GDP to fall by 11% and the ruble to dollar depreciate by 26% in 2022 are likely to reduce employment and incomes of migrants, which will only exacerbate the problem of poverty in the CIS.

Analysts also noted that Russia’s disconnection from SWIFT could reduce confidence in international payment systems and lead to the fact that a number of countries will try to develop their own systems, which, in turn, will slow down progress in ensuring interoperability, increase the cost of transfers and could equalize the results of a multi-year fight for financial transparency.

According to the World Bank, to solve the problem, it is necessary to halve the cost of money transfers (to 3% for sending $200 from 6% in the fourth quarter of 2021) and improve the quality of data on remittance flows within KNOMAD.

However, Russia’s disconnection from international payment systems will lead to difficulties in tracking unregulated cash flows in the CIS countries due to the lack of detailed information on transfers.

The WB also does not rule out that sanctions may disrupt the system of money transfers through official channels (not only in the CIS) and lead to a partial transition to informal money transfer channels around the world.

For information, SWIFT is an international system that allows financial institutions to send and receive information about transactions in a secure, standardized and reliable form via electronic communication. Since 2014, Russia has had an alternative - its own Financial Message Transmission System. 400 financial organizations and several foreign firms are connected to it (more than 11,000 are connected to SWIFT).