Owing to the fact that the existing system for overseeing remittances is fraught with challenges, the country urgently needs to enhance its framework for monitoring and tracking same.
Issues such as obtaining accurate migration data and coordinating the efforts of regulatory agencies, money transfer companies (MTCs) and fintech firms have to be addressed holistically if the country is to fully capitalise on the growing influx of inward payments to spur growth.
Dr. Richmond Atuahene, K.B Frimpong and Isaac Kofi Agyei jointly authored a study titled ‘Balance of Payments (BoPs) and Inward Remittances Compilation and Analysis Issues: The Case of Ghana from 2016-2022’, and concluded these remittances are a reliable and sustainable source of foreign exchange earnings that should not be underestimated.
In 2015, the World Bank reported that Ghana received an estimated US$2.1billion in remittances. However, the Bank of Ghana’s (BoG) data for the same year indicated that migrant remittances were nearly US$5billion.
Ghana currently ranks as the second-largest remittance recipient in sub-Saharan Africa. In 2021, remittances totalled US$4.5billion, constituting 5.9 percent of the country’s GDP; and this figure climbed to US$4.7billion in 2022, according to the World Bank.
The authors also pointed out several obstacles encountered in the compilation and analysis of remittances – stemming from a multitude of channels, non-compliance issues, the absence of proper frameworks, limited capacity for data compilation, regulatory changes and deficiencies in data quality.
The paper notes that a primary concern relates to the diverse channels used for remittance transfers, which make it difficult to accurately account for the total amount in the country’s balance of payments statistics… possibly leading to an underestimation of the actual remittance flow.
Non-compliance with regulations by digital technology infrastructure companies, including mobile money and fintech firms, presents another challenge. In 2021 the central bank issued guidelines for payment service providers such as Money Transfer Operators (MTOs) and Fintech companies, outlining how they should handle foreign funds.
For developing countries like Ghana, the absence of a suitable framework for harnessing the potential of remittances for economic growth and development remains a significant obstacle. Additionally, the high costs associated with formal remittance channels often prompt remitters to resort to informal ones, further complicating data collection.
The limited capacity of developing countries to compile Balance of Payments (BoP) statistics accurately is another concern, leading to disparities between national and international data.
Additionally, proliferation of various remittance channels, each with its unique characteristics, presents a challenge for the BoG in accurately capturing remittance statistics. Also, regulatory changes in the international remittance sector, particularly the influx of fintech companies, have not always aligned with existing regulations.
This has contributed to discrepancies between World Bank data and Ghana’s own remittance data.
Weaknesses in the country’s remittance data represent a significant issue, potentially leading to discrepancies in reported figures.
The Bank of Ghana must strengthen its procedures and processes for capturing global inward remittance data collection and analysis, including assessing the World Bank’s yearly remittance aggregates to improve remittance data.
The study notes that foreign exchange from international remittances could help reduce the current account deficit and stabilise the local currency against major trading currencies like the US dollar, euro and UK pound sterling.
Furthermore, the paper underscores the importance of conducting comprehensive surveys to assess the scale of remittances and labour migration, enabling authorities to devise strategies for maximising the benefits of remittances while minimising negative consequences.