28 November 2012

Africa: UN - Remittance to Poorest Nations Increases to U.S.$27 Billion

Photo: Business Daily.
Counting foreign currency.

Addis Ababa — Remittances sent to poor nations from family and friends living abroad has increased from $3.5 billion in 1990 to $27 billion in 2011, according to a new United Nations report.

The eight fold increase over the last 21 years from citizens of 48 of the world's least developed countries was documented in a report presented at the United Nations Conference on Trade and Development (UNCTAD) held in Ethiopian capital, Addis Ababa on Monday.

Launching the report UNCTAD's Director of the Africa and Least Developed Countries, Tesfachew Tafere, said "the world's least developed countries should take steps to draft law towards utilizing the remittance properly."

The conference, which cited Ethiopia's policy towards their Diaspora as a good example, urged governments of poor countries to reduce the transfer costs associated with remittances. Transfer fees, according to the report, often run as high as 12 percent of the money remitted - about one-third more than the global average.

The state-owned commercial Bank of Ethiopia has in recent years endorsed a new banking law, which allows the Diaspora to have savings accounts in US Dollars.

According to the bank, there has been a yearly rise in the amount of money sent by the Ethiopian Diaspora back to the country since the new initiative was put in place.

The World Bank says the Ethiopian Diaspora currently remit around $1.5 billion a year, while UNCTAD estimates the figure to be around $1 billion.

However, further funds, not included in these figures are said to be remitted to Ethiopia through transfer systems that do not involve the official banking system.

Currently, there are an estimated 27.5 million migrants from the world's 48 least developed countries living abroad. According to the report, entitled "The Least Developed Countries Report 2012: Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities", remittances have steadily surpassed the value of foreign direct investment to the countries concerned during the past decade.

The UN trade and development body stressed that remittances can play a major role in alleviating poverty and as a means of important inputs to boost developing economies.

However, UNCTAD noted that with the growing danger of global economic and financial threats, the poorest nations must be ready to review their existing policies on to how remittances should be used to promote industrial development and structural transformation.

"This may entail a range of policy interventions, such as domestic and regional development policies aimed at inducing private investments," the UN report said.

"Appropriate financial and regulatory reforms designed to reduce transaction costs and promote greater financial inclusions and credit provision for small- and medium- sized enterprises."

According to the World Bank, remittance flows to developing countries are expected to grow by 6.5 percent this year, 7.9 percent in 2013, 10.1 percent in 2014 and 10.7 percent in 2015.

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InFocus

Are Remittances Africa's Lifeline?

Counting foreign currency.

Africans living abroad remitted a total of U.S.$60 billion to the continent in 2012, says the International Organisation for Migration. Read more »