Remittances from Ghanaians grew by five per cent from $3.39 billion in 2019 to $5.57 billion in 2020, a World Bank report has said.
This was in spite of the grim economic outlook presented by the COVID-19 pandemic, which affected people’s earnings and the economies of nations worldwide last year.
The growth in remittances is the first in two years after money sent home by migrant workers suffered consistent declines in 2018 and 2019.
After peaking at $3.54 billion in 2017, remittance flows to the country fell to $3.52 billion in 2018 before dropping further to $3.39 billion in 2019, according to the World Bank data.
The report, which was released this month alongside the country by country inflows, indicated that flows to Ghana in 2020 were equivalent to 5.2 per cent of gross domestic product (GDP) and the annual rise could mark the reversal of the drop in growth suffered in the last two years.
Already, the Bank of Ghana (BoG) has expressed optimism that a global rebound in economic activities on the back of COVID-19 vaccine rollout would strengthen job prospects and boost migrants' incomes, resulting in increased flows in 2021, relative to last year.
Drivers of growth
The Head of Research at the BoG, Mr Philip Abradu-Otoo, told the Daily Graphic last Friday that last year’s growth in remittance was largely due to the frontloading of the flows and the ability of most Ghanaian migrant workers to retain their jobs amid the pandemic.
He said data showed that most workers sent home more money in the first months of the pandemic in what he described as “a frontloading of remittances to help escape the grim from the pandemic on their ability to remit”.
He added that information available to the bank showed that most Ghanaian migrant workers were in the health sectors of their countries of residence, making it easier for them not to have fallen victim to the job losses that were occasioned by the crises.
An expert in finance and economics, Mr Frederick Amissah, said the robust social networks in the Western world also helped to cushion the incomes of migrants, making it easier for them to keep to their remittance budgets.
The Fellow and Principal at the International Trade, Economics and Finance Research Group of the Institute of International Affairs (IIA), Ghana, said the strong growth in digital applications and financial services also boosted the remittances.
"In the comfort of their homes, people could send money. Also, the cost of remittance in sub-Saharan Africa has reduced considerably and that is a booster," Mr Amissah added.
At $5.57 billion for 2020, remittances have become the second largest foreign exchange earner for the country; trailing only revenue earned from gold exports while surpassing those from crude oil and cocoa.
Data from the BoG showed that the country realised about US$6.9 billion from gold exports and US$2.9 billion and US$2.3 billion from crude oil and cocoa exports respectively.
The Head of BoG's Research Department said the prospects for remittance flows to the country were bright this year, with COVID-19’s impact on businesses and economies waning.
He said the bank was projecting a strong growth in 2021 on the back of the aggressive deployment of vaccines, the gradual recovery in economic activities and the opening up of companies in Asian and Western countries.
He said the central bank also expected migrants who lost their jobs to the pandemic to recover them or find new ones this year to boost their chances of sending funds back home to their families and loved ones.
Meanwhile, the World Bank report indicated that remittance flows into sub-Saharan Africa (SSA) were strong last year although a 27.7 per cent decline in flows into Nigeria dragged the regional total down by 12.2 per cent. Nigeria accounts for about 40 per cent of remittance flows to SSA.
“Excluding Nigeria, remittance flows to SSA increased by 2.3 per cent, demonstrating resilience at a time of crisis. Indeed, strong remittance growth was reported in Zambia (37 per cent), Mozambique (16 per cent), Kenya (9 per cent), and Ghana (5 per cent). Data from the Central Bank of Somalia and Zimbabwe reported an increase of 16 per cent and 31 per cent respectively.”
“In Cape Verde, The Gambia and Senegal, remittance inflows fared better than projected,” the report said.
Cost of remitting
It said SSA remained the highest remittance cost region, with the average cost of remittance transfers reaching 8.17 per cent in the last quarter of 2020.
Looking ahead, the report said remittance flows to the region were projected to rise by 2.6 per cent to US$43 billion and 1.6 per cent to US$44 billion in 2021 and 2022, respectively.
“Remittances are expected to be supported by improving growth prospects in the United States and other high-income host countries. Remittances to Kenya for quarter one of 2021 increased by 17 per cent compared to quarter one of 2020, supported by a 40 per cent increase in remittances from North America,” it said.
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