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Tag: Remittances

  • Remittances are more lucrative than gold and cocoa – Finance analyst

    Remittances are more lucrative than gold and cocoa – Finance analyst

    Banking and Finance analyst Dr. Richmond Atuahene has highlighted that Ghana’s remittance inflows surpass those from cocoa, oil, and even gold.

    According to Dr. Atuahene, remittances have generated $28.6 billion over a decade, outpacing cocoa’s $18.7 billion and gold’s $7.6 billion.

    Speaking at the third edition of the Graphic Business/Stanbic Bank Breakfast Meeting on August 20 at the Labadi Beach Hotel in Accra, Dr. Atuahene emphasized that even when combining the revenues from gold and cocoa, remittances still exceed these combined figures by $2.3 billion.

    “So that is why some of us have described it as gold, super gold, because it is something if it is well structured, captured, traced into the balance sheet, I think Ghana will be somewhere, I think maybe near Dubai because it is something that will support the economy,” he added.

    Dr. Richmond Atuahene’s comments are in response to a World Bank report that estimated $27.6 billion in remittances flowed into Ghana between 2016 and 2022.

    This figure contrasts with the Auditor General’s reports, which recorded only $22 billion in remittances during the same period, revealing a discrepancy of $5.6 billion.

    Addressing this gap, Dr. Atuahene noted that Ghana could potentially earn even more from remittances if they were accurately tracked and accounted for.

    “…. I am only talking about the remittances captured by the central bank. The difference between the World Bank is $36 billion, but the country captured only $28 billion, so if we were able to trace, track and capture, we would have captured about $36 billion and that is far more exceedingly above gold and cocoa”, Dr Atuahene said.

    The third edition of the Graphic Business/Stanbic Bank Breakfast Meeting is being held under the theme “The Remittance Ecosystem Impact on the Economy.”

  • Ghana ranks 2nd in Sub-Saharan Africa for remittances – WB Report

    Ghana ranks 2nd in Sub-Saharan Africa for remittances – WB Report

    In 2023, Ghana emerged as the second-largest recipient of remittances in Sub-Saharan Africa, marking a significant milestone in its economic landscape.

    According to the World Bank’s 2024 Migration and Development Report, Ghana received an estimated $4.6 billion in remittances, underscoring the vital role these funds play in the country’s financial stability.

    Leading the region, Nigeria topped the list with $19.5 billion in remittances, followed by Ghana. Despite a slight overall decrease in remittance flows across Sub-Saharan Africa, Ghana’s robust position highlights the resilience and importance of remittances in supporting household incomes and national economies.

    The report further detailed that Kenya secured third place with $4.2 billion, Zimbabwe fourth with $3.1 billion, and Senegal with $2.9 billion in remittances. The Democratic Republic of Congo received $1.4 billion, Uganda $1.3 billion, Mali $1.2 billion, and both Sudan and South Africa $1.0 billion each.

    Remittances to Sub-Saharan Africa exceeded Foreign Direct Investment (FDI) inflows by nearly 1.5 times in 2023, showcasing their substantial impact on regional economies. FDI to the region totaled $38.6 billion, driven primarily by new projects in Kenya and Nigeria, as reported by the United Nations Conference on Trade and Development (UNCTAD).

    The World Bank emphasized that remittances have become the primary source of foreign exchange earnings in several countries. For instance, in Kenya, remittances surpassed revenues from key exports like tourism, tea, coffee, and horticulture. Countries such as The Gambia, Lesotho, Comoros, Liberia, and Cabo Verde rely heavily on remittances, contributing over one-fifth of their GDP in some cases.

    Despite challenges and fluctuations in global economic conditions, regional growth in remittances in 2023 showed significant increases in countries like Uganda (up 15% to $1.4 billion), Rwanda (up 9.3% to $0.5 billion), Kenya (up 2.6% to $4.2 billion), and Tanzania (up 4% to $0.7 billion). However, remittances to Nigeria, which constitute about 35 percent of total inflows to the region, declined by 2.9 percent to $19.5 billion.

    Looking ahead, projections suggest a recovery in remittance growth for Sub-Saharan Africa, with expectations of a slight increase from a negative growth rate of -0.3 percent in 2023 to +1.5 percent in 2024. This anticipated rebound reflects ongoing resilience and the enduring role of remittances in supporting regional economies amid global uncertainties.

  • Remittance flows grow in 2023 – World Bank reports

    Remittance flows grow in 2023 – World Bank reports

    The World Bank’s Migration and Development Brief, released today, highlights concerns about the potential decline in real income for migrants in 2024 amid global inflation and low growth prospects.

    Remittances to low- and middle-income countries (LMICs) experienced an estimated growth of 3.8% in 2023, a moderation from the high gains of the previous two years.

    In 2023, remittance flows to LMICs reached an estimated US$669 billion, supported by resilient labor markets in advanced economies and Gulf Cooperation Council (GCC) countries, enabling migrants to send money home.

    Remittance inflows grew for Latin America and the Caribbean (8%), South Asia (7.2%), East Asia and the Pacific (3%), and sub-Saharan Africa (1.9%). However, flows to the Middle East and North Africa fell for the second year, declining by 5.3%, mainly due to a sharp drop in flows to Egypt. Remittances to Europe and Central Asia also decreased by 1.4% after a gain of more than 18% in 2022.

    The United States remained the largest source of remittances, with the top five recipient countries being India ($125 billion), Mexico ($67 billion), China ($50 billion), the Philippines ($40 billion), and Egypt ($24 billion).

    Economies where remittance inflows represent substantial shares of GDP include Tajikistan (48%), Tonga (41%), Samoa (32%), Lebanon (28%), and Nicaragua (27%), emphasizing the importance of remittances for funding current account and fiscal shortfalls.

    The trajectory of weaker global economic activity is expected to result in a further softening of remittance growth to LMICs, projected at 3.1% in 2024. Factors contributing to this moderated forecast include slowing economic growth and the prospect of weaker job markets in several high-income countries. Additional downside risks include volatile oil prices, currency exchange rates, and a deeper-than-expected economic downturn in high-income countries.

    “During crises, migrants have weathered risks and shown resilience to support families back home. But high inflation and subdued global growth is affecting how much money they can send,” said Iffath Sharif, global director of the Social Protection and Jobs Global Practice at the World Bank. “Labor markets and social protection policies in host countries should be inclusive of migrants, whose remittances serve as a vital lifeline for developing countries.”

    As per the Remittances Prices Worldwide Database from the World Bank, remittance costs remain consistently high, averaging 6.2% to send US$200 in the second quarter of 2023. In comparison to the previous year, sending money to all regions has become more expensive, with the Middle East and North Africa being the only exception.

    Banks continue to be the most expensive channel for sending remittances, with an average cost of 12.1%, followed by post offices (7%), money transfer operators (5.3%), and mobile operators (4.1%).

    “Remittances are one of the few sources of private external finance that are expected to continue to grow in the coming decade. They must be leveraged for private capital mobilization to support development finance, especially via diaspora bonds,” said Dilip Ratha, lead economist and lead author of the report.

    “Remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years, and the gap is increasing.”

    A dedicated segment of the report explores the potential of mobilizing diaspora finances for development and fortifying a country’s debt position. Diaspora bonds offer a structured approach to directly access diaspora savings held in foreign destinations. Many nations have provisions for nonresident deposits aimed at attracting diaspora savings.

    However, in contrast to diaspora bonds, these savings often exhibit short-term and volatile characteristics. Leveraging future remittance inflows as collateral presents an opportunity to reduce the costs of international borrowing for developing countries.

    Given their substantial size compared to other foreign exchange sources, counter-cyclical nature, and indirect contribution to public finances, remittances can play a crucial role in enhancing a country’s sovereign ratings and its capacity to meet debt obligations.

    Regional remittance trends

    Remittances to East Asia and the Pacific rose by approximately 3% to reach $133 billion in 2023. Excluding China, the region witnessed a 7% growth in remittances, amounting to $83 billion, supported by sustained flows to the Philippines. The average cost of sending $200 to the region was 5.9% in the second quarter of 2023, with a projected remittance growth of 2.4% in 2024.

    Meanwhile, remittance flows to Europe and Central Asia faced an estimated 1.4% decline, amounting to $78 billion in 2023. This subdued growth is attributed to the high baseline in 2022, driven by substantial transfers from Russia, coupled with weakened flows to Russia and Ukraine. The average cost of sending $200 to the region was 6.9% in Q2 2023, with a projected 1.2% decline in 2024.

    In Latin America and the Caribbean, remittance flows are anticipated to surge by 8% to $156 billion in 2023. The robust U.S. labor market positively impacted remittance flows, with a projected 9.7% increase to Mexico. The average cost of sending $200 to the region was 6.1% in Q2 2023, and growth is expected to slow to 4.4% in 2024.

    The Middle East and North Africa are forecasted to experience a 5.3% decline in remittance flows to $61 billion in 2023, primarily due to a significant drop in flows to Egypt. Remittance flows to South Asia grew by 7.2% to $189 billion in 2023, led by robust flows to India, projected to reach $125 billion. The average cost of sending $200 to the region was 4.3% in Q2 2023, with a forecasted growth slowdown to 5% in 2024.

    Sub-Saharan Africa is expected to witness a 1.9% increase in remittance flows to $54 billion in 2023. Key contributors include strong growth in Mozambique (48.5%), Rwanda (16.8%), and Ethiopia (16%). Remittance flows to the region are projected to increase by 2.5% in 2024, with an average cost of sending $200 at 7.9% in Q2 2023.

  • Over 50% of foreign remittances to Ghana remain unaccounted for – Report

    Over 50% of foreign remittances to Ghana remain unaccounted for – Report

    Graphic Business has reported that more than half of the foreign remittances entering Ghana cannot be adequately accounted for, a problem stemming from the deregulation of the foreign remittances sector.

    The introduction of fintech companies following the Payment Systems and Services Act of 2019 has had a negative impact on the stability of the local currency, according to Banking Consultant Dr. Richmond Atuahene. He stated that if all remittances were accurately tracked, they could have significantly bolstered the local currency.

    In 2021, Ghana received $4.5 billion, and in 2022, it received $4.7 billion, according to a World Bank report. However, the Auditor-General’s Report on the Consolidated Statements of Foreign Exchange Receipts shows that remittances for those years amounted to $2.11 billion and $2.12 billion, respectively.

    Dr. Atuahene emphasized that this reveals discrepancies in the country’s remittance data compared to the World Bank’s assessment. The World Bank tracks remittance figures from the source, suggesting that the Bank of Ghana (BoG) may not be monitoring all remittances.

    He suggested that this situation could be a consequence of the sector’s deregulation, with fintech companies potentially not reporting their remittances to the BoG, which would be a clear violation of the Foreign Exchange Act.

    “This may be due to the deregulation of the sector, with fintech companies potentially not declaring their remittances to the BoG, in violation of the Foreign Exchange Act.”

    Concerns are raised by the disparities between the BoG’s balance of payments and the World Bank report, which show that over half of the remittances received in Ghana are not included in the latter’s figure.

    “When you take the World Bank report and the BoG figures, you see some discrepancies between the two.

    So it’s either we are not tracking all the remittances because it
    seems more than half of the remittances that come into the country are not reflecting on the BoG’s balance of payment.”

    “In 2019, we passed the Payment Systems and Services Act which was accompanied by a National Payment Strategic Plan which created the enabling environment for other private Money Transfer Companies (MTC) and Fintechs to play an active role in receiving remittances and it appears their activities are the reason why we are not capturing all the remittances.” he said.

    Dr. Atuahene thinks that the volatility of the local currency is caused by fintech companies hoarding foreign currencies rather than turning them over to the BoG. Ensuring accurate monitoring of all remittances has the potential to greatly boost the nation’s economy.

    “When you go into the Foreign Exchange Act, it states categorically that no institution can hold foreign currency except BoG or the authorised dealer banks but due to the introduction of these MTCs and fintechs, people are now sending their remittances through them and they end up holding on to the foreign currencies and don’t surrender
    them to the BoG.”

    “If all these funds were coming into the banking system, the banks would have used it in supporting payments of imports and BoG wouldn’t have to come in to sell forex to the Bulk Oil Distributing Companies (BDCs).”

    “I worked as a foreign exchange dealer in a bank and we used to go to some of these MTCs and Fintechs for foreign currencies, which is a clear indication that they have been holding on to them,” he disclosed.

    In order to find flaws and leaks, he also demanded a forensic audit of all remittances entering the nation.

    Furthermore, he suggests that in order to ascertain whether remittances are a constant in Ghana’s balance of payments, the Ministry of Finance, the Ministry of Foreign Affairs and Regional Integration, and the Bank of Ghana should collaborate with development partners such as the World Bank.