Remittances are an important income source for poor and low-income rural households in Myanmar. In their research, Xinshen Diao and Kristi Mahrt develop a microsimulation model to assess the impact of declining remittances caused by COVID-19 on Myanmar’s household incomes and poverty. They also estimate the financial support required to mitigate the negative effects of these impacts on remittance-receiving households.
You can read the full policy note by Xinshen and Kristi in English here.
International and domestic migrant work
Myanmar has approximately 4 million international migrants, predominantly employed in China, Thailand, Malaysia, and India. Consequently, international remittance inflows are an important income source for many rural and urban Myanmar households.
For 2015, it was estimated that remittances from legal migrants totaled 3.5 billion US dollars, equivalent to 5 percent of GDP. If illegal migrant remittances were included, the value of total remittances is estimated at 8 billion US dollars and 13 percent of GDP.
Myanmar also has many long-term domestic migrant workers who provide essential support to families in other parts of the country.
As of April 23, the lockdowns in China and Thailand due to COVID-19 outbreaks resulted in 60 thousand Myanmar migrants in these countries losing jobs and returning home. At the same time, an additional 80 thousand to 100 thousand migrants were awaiting entry at border gates.
Myanmar’s COVID-19 outbreak also affected domestic remittance flows. As a result of lockdown measures to contain the spread of the virus and post-lockdown restrictions on people’s movement and economic activities, many domestic migrant workers have lost their jobs and remittance income received by their families has fallen significantly.
In their analysis, Xinshen and Kristi consider the declines in international and domestic remittances caused by COVID-19 and use a microsimulation model to assess their impact on Myanmar’s household income and poverty.
Remittances for Myanmar households
Figure 1 displays the total number of Myanmar households with remittance income and the number of households with international remittance income as a percent of total households.
Additionally, it is necessary to understand the importance of remittance income relative to other income sources for households. In Figure 2, income from total remittances is presented as the percentage share of total income for different types of remittance-receiving households.
Figure 2 shows heterogeneity in the importance of remittances among different household groups and between poor and low-income households within each group. As expected, remittances are one of the most important income sources for female-headed rural households that receive remittances, contributing 37 percent of their income on average. However, between poor and low-income remittance-receiving female-headed rural household groups, the importance of remittances differs.
Remittances are generally more important for low-income than for poor rural households across different types of households.
Heterogenous impacts of declining remittances
In their research, Xinshen and Kristi design two scenarios to assess the impact of declining remittances on rural household income and poverty.
- In the first scenario, they focus on international remittances only, which are shocked by a 50 percent decline uniformly across all international remittance-receiving households.
- In the second scenario, in addition to the 50 percent shock on international remittances, domestic remittances are shocked by a 30 percent decline uniformly across all households.
While the shocks are uniform in both scenarios, the impact of such shocks differs across households depending on the importance of remittances to individual households.
Figure 3 focuses on poor and low-income households that receive remittance income and displays the expected declines in total income across household groups due to the 50 percent of international remittance shock and the 30 percent domestic remittance shock.
For rural households with remittance income, declines in total income are consistently higher among low-income households compared to poor households. While the remittance shocks might result in smaller percentage declines in income among poor rural households than among low-income rural households, the impact on poor rural households should not be underestimated because of their initial much lower income levels.
Rising poverty for remittance-receiving rural households
Because declining remittances disproportionally affect low-income rural households, many of their incomes will fall below the poverty line due to the COVID-19 remittance shock. Figure 4 shows rising household poverty across all remittance-receiving household groups.
At the national level, the share of poor households will increase by 7.5 percentage points after the shock, rising to 30.4 percent.
That is, in addition to the 600 thousand remittance-receiving households already poor before the shock, 200 thousand households previously low-income but not poor will fall into poverty after the remittance shock.
Estimated financial support required
Xinshen and Kristi’s analysis shows that declining remittances due to COVID-19 related shocks lead to poor remittance-receiving households falling deeper into poverty and to many previously low-income remittance-receiving households becoming poor.
They next estimate the total amount of financial support required to maintain the food and nutrition security for already poor remittance-receiving households at their pre-shock level and for previously low-income remittance-receiving households to stay out of poverty.
- For already poor households, the required financial support is based on lost remittance income, which totals about 144 billion Myanmar kyat or 95 million US dollars annually.
- For previously low-income but not poor remittance-receiving households, a total of 89 billion Myanmar kyat or 59 million US dollars per year would assist in preventing low-income households from falling into poverty.
Key findings
Remittances are an important income source for many Myanmar households, particularly for smallholders and rural female-headed households. Remittances are especially important for many low-income rural households to stay out of poverty. Therefore, declining remittance income resulting from the COVID-19 outbreak can have significant poverty effects in Myanmar. Xinshen and Kristi’s study finds:
- With an assumed 50 percent decline in international remittance income and a 30 percent decline in domestic remittance income, many poor households are now more impoverished and many low-income remittance-receiving rural households are expected to fall into poverty.
- Nationwide, the poverty rate among remittance-receiving households will rise by 7.5 percentage points. More than 600 thousand already poor households will become more impoverished and another 200 thousand households not poor before the shock will fall into poverty.
- Rural households account for most of the vulnerable remittance-receiving households – 88 percent of the already poor and newly poor nationwide.
- There are almost 250 thousand poor and low-income remittance-receiving rural households with children under 5 years of age. Falling remittance income for these households will likely have negative effects on the nutrition and health of these young children.
- An estimated 230 billion Myanmar kyat or 150 million US dollars per year is the total amount of financial support needed to maintain the pre-shock food and nutrition security of poor remittance-receiving households and to prevent low-income remittance-receiving households from falling into poverty.
Xinshen Diao is the Deputy Director of the Development Strategy and Governance Division (DSGD) of the International Food Policy Research Institute (IFPRI), based in Washington, DC. Kristi Mahrt is a Senior Research Analyst in DSGD of IFPRI, based in Colorado, USA.
This work was undertaken at the request of the Myanmar Policy Support Activity (MAPSA) and the United States Agency of International Development (USAID). Funding for the study was provided by the CGIAR Research Program on Policies, Institutions, and Markets and USAID. Comments were elicited from MAPSA team members, USAID, and local and international experts. Industry leaders in Myanmar were remotely interviewed to obtain their insights and concerns about the current risks facing their institutions and their clients. The authors thank all contributors for their time and valuable insights while taking responsibility for the final content.
This blog post was prepared by Michael Wang, Mickey Leland International Hunger Fellow at IFPRI.