Cedi depreciation: Is remittances the forgotten saviour?

On receipt of the submitted data, the staff examines the plausibility of the estimates and where there is a need, the staff follows up with the reporting institution to validate the reported numbers.

One of the major methodological issues was on the compilation and analysis as we observed major discrepancies between the World Bank data on international remittances and that of the Bank of Ghana data on inward remittances as captured on consolidated foreign exchange receipts yearly to the balance of payments data, total inward remittances to the Ghanaian economy ranged between US$2,005,542,497.

The study noted major discrepancies between the Bank of Ghana’s inward remittance returns as part of foreign exchange receipts and the World Bank’s inward remittance reports over the period under review.

The 23 authorized dealer commercial banks’ inward remittance returns were required to be submitted in compliance with the Foreign Exchange Act 2006 Act 723. Over the years, authorized dealer banks and Money Transfer companies (MTCs) and banking agents have facilitated funds transfer from abroad to beneficiaries in Ghana, which were accessed largely through banking halls with the benefit of the foreign currencies being held in local banks’ Nostro account with overseas correspondent banks.

Mobile money and other digital channels that have been made available by payment service providers are now providing extensive, affordable, convenient, and flexible alternative means for accessing remittances by beneficiaries but foreign exchange components could not be traced and tracked to the local banks’ returns or the Bank of Ghana’s nostro balances with their correspondent banks.

From previous practices, the local banks then submitted inward remittance returns and their usage of foreign exchange to the Bank of Ghana monthly so that they could capture international remittances in their consolidated foreign receipts.

Also, after careful examination of the Bank of Ghana’s consolidated foreign receipts on the Balance of Payment data from 2019 to 2022, we noted that there had been no recording, tracking and tracing of the inward remittances in the Bank of Ghana’s consolidated foreign receipts.

Various research studies have shown that international remittance flows could lead to currency appreciation as well as improving country’s foreign exchange reserves

Second, the methodological issue was about the compilation and analysis of inward remittances about the current different channels posed different challenges to the Bank of Ghana as the compiler and the ease with which data may be obtained from these various channels depends on the institutional and foreign exchange environment governing remittance transactions and data compilation.

Remittance transaction channels are wide and varied and the choice of channel depends on a number of factors including the cost of sending money abroad, speed of delivery, information technology infrastructure at the senders and receivers’ locations, hidden costs in foreign exchange transactions, safety of the funds and so on.

Compilers like the Bank of Ghana of inward remittance statistics might however, find it difficult to know all sources especially the informal sources through which remittances are sent.

There is an urgent need to enhance the linkage between money transfer companies, Fintech companies and the rural bank network to track and trace the foreign exchange components of inward remittances.

Bank of Ghana must ensure total compliance with the Foreign Exchange Act 2006, Act 723; AML Act 2020, Act 1044; and Anti-Terrorism Amendment Act 2014, Act 875 to ensure the continuous remittance flows to support the foreign exchange.

Inward remittances remain a stable and sustainable source of foreign exchange earnings too huge to be ignored because inward remittances have contributed to the country’s foreign exchange more than cocoa and surrendered gold proceeds over the past decade. Its benefits far outweigh the few disadvantages that have been pointed out.