How remittances will affect Ghana’s economy in 2023 and beyond

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remittances
Remittances

The World Bank recognizes remittances as critical economic stabilizers as they help countries adjust to policy shocks at the macroeconomic level and help low-income families transform their ability to access good health care and education services. In 2022, remittance inflows to low-and middle-income countries increased to $626 billion USD, up from $597 billion USD in 2021, outpacing the flow of foreign direct investment.

In 2023, remittance inflows to Ghana are expected to reach about $5 billion USD, slightly easing the pressure on the country’s forex. This inflow is expected to transform the lives of Ghanaians, with studies showing that remittances reduce the level, depth, and severity of poverty throughout the country.

We spoke to Darryl Pietersen, Director of Anglophone Africa, WorldRemit, to get his views on the impact of both internal and international remittances on the lives of Ghanaians.

  1. We are beginning a new year; what are your expectations of remittances to Ghana?
  2. WorldRemit just recently launched its second Cost of Living Index, which indicated that Ghanaians are showing a level of caution following the cost-of-living crisis of 2022. However, the value of remittances to Ghana grew throughout the year to reach a record $4.7 billion USD, an indication of the eagerness by Ghanaians abroad to alleviate the financial situation of their families back home.

This trend is expected to continue as digital remittance technologies and services gain preference. At WorldRemit, we are seeing an increase in the number of tech-savvy consumers of remittance services who prefer the convenience, speed, and security that digital transfers offer.

Globally, things are expected to improve in the second half of 2023. Most projections show that the dramatic inflation will decrease, driving an even larger rise in remittance inflows into Ghana.

  1. Digital technologies are becoming more widespread in Ghana. How would this affect remittances to the country in 2023 and the years after?
  2. One in five Ghanaians today rely on remittances for their daily expenses, with studies showing that remittances increase the household ability of Ghanaians to buy food, improve their housing, and sustain their children’s education. Indeed, remittances significantly accelerate poverty reduction in Ghana, where about 6.8 million people live below the poverty line, with multidimensional poverty reaching 64.6% in rural and 27% in urban areas, respectively. Digital remittance technologies are quickly expanding across the country, providing more secure avenues for the Ghanaian diaspora to contribute to the national fight against poverty.

The beauty of digitalization is that it leads to the quickening of remittance processes that would traditionally take days and weeks while keeping the associated costs down. For example, in most cases, it takes under five minutes for funds to securely travel from most parts of the world to recipients in Ghana using WorldRemit’s digital platforms. Continued innovation will bring even more changes to the sector. We expect this to keep lowering the costs for users of digital remittance services and, ultimately, increasing the value of remittances in Ghana and the rest of the developing world.

  1. The last three years have been especially difficult for businesses worldwide due to the Covid pandemic and the ongoing cost-of-living crisis. What lessons have you learned as a player in the remittance sector?
  2. One of the biggest learnings is the importance of resilience and adaptation. Throughout the COVID period, we have supported our customers by minimizing transaction costs, allowing them to maximize the amount sent and received. Our investment in digital technologies and partnerships has also helped keep our operations fluid and support our clients’ remittance needs – however, they want to receive money.
  3. Overall, how do digital remittances affect Ghana’s growth?
  4. Digital remittance technologies are transforming Ghana’s socio-economic prospects by providing an opportunity for financial inclusion, unlike before. We see the rapid transformation of villages as Ghanaians working abroad can quickly send home money for development, upkeep, education, and emergencies like hospital bills. This trend is expected to continue in the coming years, and we foresee more advancements linked to the rise of related digital products like savings and investment apps.
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