June 14, 2024
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$5bn worth of remittances expected in 2023 to ease Ghana’s forex pressure

The pressure on Ghana’s forex is expected to ease with an expected $5 billion in remittances for 2023, following a $4.7 billion inflow of remittances in 2022.   

The remittance for next year, together with the IMF $3bn loan-support programme, is expected to contribute to efforts by the Government to have a stable economy and increased macroeconomic confidence.   

Mr Darryl Mawutor Abraham, the Growth Director in charge of Africa for Tap Tap Send, a remittance company, said this in an interview with the Ghana News Agency on Tuesday.

The company celebrated Christmas with families who received money through them by giving locally produced rice and cooking oil to about 1,000 families who received remittances through the company.

Mr Mawutor was confident that the financial technology (fintech) sector would still be strong in 2023 and said: “I’m forecasting that the amount of remittances coming into the country would grow from $4.7 billion this year to $5 billion next year.”   

He said the 4.4 per cent growth in remittances for 2022, per data by the World Bank Migration and Development Brief, which made Ghana, the second largest recipient of remittance in Africa would grow in 2023.   

“We believe that every Ghanaian in the diaspora if they choose to use Tap Tap Send, and other remittance platforms, we can hit this big, massive figure for Ghana, and it would help meet our foreign exchange needs,” he added.    

Mr Mawutor, therefore, called for a stronger collaboration between the Bank of Ghana (BoG) and all sector players to ensure that Ghana earned more foreign exchange next year, noting that: “This would massively change the economy.”    

He said: “This would make the IMF not that bad because it would ease the pressure on the cedi and the pressure on the economy and make the government find some money to improve not only the economy’s health but the life of everyone.”  

On the issue of some remittance companies short-changing the Government in terms of revenue, the Growth Director said the Central Bank had put together a regulatory framework to make Ghana get what it was due.   

He said that the Fintech and Innovation Office of the Bank granted licenses to fintech, remittance and consulting firms, worked with third parties and monitored their operations within the sector to make monies pass through banks.    

He said: “All our foreign entry inflows are still being seen and going through an arm of the Bank of Ghana regulators. Now, it is up to them to work out how they can make some revenue from that source.”   

Mr Wawutor then cautioned against putting a tax on remittance, saying: “Any tax on remittance would lead to people sending less. If people send less, there would be less foreign exchange in the country and there would be little foreign capital, which would negatively impact the economy.”   

The Growth Director for Tap Tap Send then asked the government to come up with innovative ways to make commercial banks and license holders thrive and build a system to make some revenue from there.   

He expressed their willingness to support the government to ensure that more revenue was generated to support national development and improve the livelihoods of the people.   

Regarding the celebration of the festive season with their customers, Mr Mawutor said: “We’ve lots of loyal customers who send money through us every time, so, we’re saying thank you to them by helping them celebrate Christmas better by providing them with some items for their loved ones in Ghana.”

Madam Oforiwaa Yartey, who received a package of rice and cooking oil, told GNA that she was happy because it was the first time in more than five years that a company had made such a gesture.

Remittances to low- and middle-income countries (LMICs) withstood global headwinds in 2022, growing an estimated 5% to $626 billion, according to the World Bank.

This is sharply lower than the 10.2% increase in 2021, the latest World Bank Migration and Development Brief noted. 

Remittances are a vital source of household income for LMICs.

They alleviate poverty, improve nutritional outcomes, and are associated with increased birth weight and higher school enrollment rates for children in disadvantaged households.

Studies show that remittances help recipient households to build resilience, for example through financing better housing and to cope with the losses in the aftermath of disasters.

Remittance flows to developing regions were shaped by several factors in 2022.

A reopening of host economies as the COVID-19 pandemic receded supported migrants’ employment and their ability to continue helping their families back home.

Rising prices, on the other hand, adversely affected migrants’ real incomes. Also influencing the value of remittances is the appreciation of the ruble, which translated into higher value, in U.S. dollar terms, of outward remittances from Russia to Central Asia.

In the case of Europe, a weaker euro had the opposite effect of reducing the U.S. dollar valuation of remittance flows to North Africa and elsewhere.

In countries that experienced scarcity of foreign exchange and multiple exchange rates, officially recorded remittance flows declined as flows shifted to alternative channels offering better rates.

“Migrants help to ease tight labour markets in host countries while supporting their families through remittances. Inclusive social protection policies have helped workers weather the income and employment uncertainties created by the COVID-19 pandemic. Such policies have global impacts through remittances and must be continued,” said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.

By region, Africa stands to be the most severely exposed to the concurrent crises, including severe drought and spikes in global energy and food commodity prices.

Remittances to Sub-Saharan Africa are estimated to have increased 5.2% compared with 16.4% last year.

In other regions, remittance flows are estimated to have increased 10.3% to Europe and Central Asia, where rising oil prices and demand for migrant workers in Russia supported remittances, in addition to the currency valuation effect.

In Ukraine, remittance growth is estimated at 2%, lower than earlier projections as funds for Ukrainians were sent to countries hosting them, and hand-carried money transfers likely increased.

Growth in remittance flows is estimated at 9.3% for Latin America and the Caribbean, 3.5% in South Asia, 2.5% in the Middle East and North Africa, and 0.7% in East Asia and the Pacific.

In 2022, for the first time a single country, India, is on track to receive more than $100 billion in yearly remittances.

In a special feature on climate-driven migration, the Brief notes that rising pressures from climate change will both drive increases in migration within countries and impair livelihoods.

The poorest are likely to be most affected as they often lack the resources necessary to adapt or move.

Studies show that migration can play a role in coping with climate impacts, for example, by providing an escape from disasters and also through remittances and other forms of support to affected households.

Changes in the international legal norms and institutional frameworks for migration may be required to cope with the challenge of climate-related migration, particularly in the context of cross-border mobility, as is the case for small island nations.

“People throughout history have responded to deteriorating climates by moving to survive. Planning for safe and regular migration as a part of adaptation strategies will be required for managing displacement in the affected regions as well as the influx of people in the receiving communities,” said Dilip Ratha, lead author of the Brief and head of the Global Knowledge Partnership on Migration and Development (KNOMAD).

“National and regional development strategies should be viewed through a climate migration lens,” he added.

Also reported in the Brief is the cost of sending $200 across international borders to LMICs, which remains high at 6% on average in the second quarter of 2022, according to the Remittances Prices Worldwide Database.

It is cheapest to send via mobile operators (3.5%), but digital channels account for less than 1% of total transaction volume. Digital technologies allow for significantly faster and cheaper remittance services.

However, the burden of compliance with Anti-Money Laundering/Combating the Financing of Terrorism regulations continues to restrict access of new service providers to correspondent banks.

These regulations also affect migrants’ access to digital remittance services. 

Regional Remittance Trends

Remittances to the East Asia and Pacific region are estimated to have increased by 0.7% to $134 billion in 2022, arresting the decline of the previous two years.

Labour shortages in the hospitality and health sectors of high-income economies and higher oil prices benefiting Gulf Cooperation Council countries boosted demand for workers in 2022, which supported remittances.

However, remittances to China are estimated to have dropped by nearly 4%, driven by restrictions on workers from travelling abroad due to COVID-related policies.

Remittances as a share of GDP are significant in Tonga (50%) and Samoa (34%).

In 2023, remittances are projected to decline by 1% due to weaker conditions in migrants’ destination countries.

The cost of sending $200 to the region rose to 6.2% on average in the second quarter of 2022 from 5.8% a year earlier.

Remittance flows to Europe and Central Asia are estimated to have increased by 10.3% to $72 billion in 2022.

Rising oil prices and demand for migrant workers increased the flow of remittances from Russia to Central Asian countries.

The appreciation of the ruble against the U.S. dollar translated into higher value, in dollar terms, of outward remittances from Russia to Central Asia. Remittances to the Kyrgyz Republic and Tajikistan exceed 30% of GDP.

In 2023, remittance receipts are projected to moderate further to 4.2% growth due to a softer outlook for major remittance-sending countries.

The cost of sending $200 to the region rose slightly to 6.4% on average in the second quarter of 2022 (data excludes corridors originating in Russia).

Remittances to Latin America and the Caribbean are estimated to have grown 9.3% in 2022 to $142 billion.

Data for the first nine months of 2022 show a 45% increase for Nicaragua, 20% for Guatemala, 15% for Mexico, and 9% for Colombia. Stronger employment of migrants from Latin America in the United States contributed to remittance flows.

Remittances received by migrants in transit also contributed to strong flows in Mexico and Central America.

As a share of GDP, remittances exceed 20% in El Salvador, Honduras, Jamaica, and Haiti.

In 2023, remittances will likely moderate to 4.7% growth due to a weaker economic outlook for the United States, Italy, and Spain.

Sending $200 to the region cost 6% on average in the second quarter of 2021, up from 5.6% a year ago.

Remittances to the developing countries of the Middle East and North Africa are estimated to have grown 2.5% in 2022 to $63 billion, compared to a 10.5% growth last year.

Slower growth in remittances is partly tied to the erosion of real wage gains in the Euro Area, even as demand for remittances in home countries increased amid deteriorating conditions, including drought in the Maghreb and high imported wheat prices.

As a share of GDP, remittances are significant in Lebanon (38%) and West Bank and Gaza (19%).

Remittance inflows are projected to grow by 2% in 2023.

Sending $200 to the region cost 6.3% on average in the second quarter of 2022.

Remittances to South Asia grew an estimated 3.5% to $163 billion in 2022, but there is large disparity across countries, from India’s projected 12% gain—which is on track to reach $100 billion in receipts for the year–to Nepal’s 4% increase, to an aggregate decline of 10% for the region’s remaining countries.

The easing of flows reflects the discontinuation of special incentives some governments had introduced to attract flows during the pandemic, as well as preferences for informal channels offering better exchange rates.

Remittances to India were enhanced by wage hikes and a strong labour market in the United States and other OECD countries.

In the Gulf Cooperation Council destination countries, governments ensured low inflation through direct support measures that protected migrants’ ability to remit.

Sending $200 to the region cost 4.1% on average in the second quarter of 2022, down from 4.3% a year ago.

Remittances to Sub-Saharan Africa, the region most highly exposed to the effects of the global crisis, grew an estimated 5.2% to $53 billion in 2022, compared with 16.4% last year (due mainly to strong flows to Nigeria and Kenya).

Remittances in 2023 are projected to soften to 3.9% growth as adverse conditions in the global environment and regional source countries persist. Remittances as a share of GDP are significant in the Gambia (28%), Lesotho (21%), and Comoros (20%).

Sending $200 to the region cost 7.8% on average in the second quarter of 2022, down from 8.7% a year ago.

Remitting from countries in the least expensive corridors is on average 3.4% compared to 25.2% for the costliest corridors.

The Migration and Development Brief analyzes trends in migration-related SDG indicators: increasing the volume of remittances as a percentage of GDP, reducing remittance costs, and reducing recruitment costs.

Source: GNA with additional files from the World Bank Group

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