3 February 2013

Uganda: Kyeyo Cash Surpasses Coffee Earnings

For decades, economists looked at it as a blip of a statistic that hinted at the tendency of expatriates to send a little pocket money back home to support their families.

But now, remittances from migrants have shot to such levels that the World Bank has been tracking this money. In their latest report, released in 2012, remittances topped U.S $530 billion (£335 billion) globally. And at least U.S $879.41 million of the U.S $530 billion in the financial year 2011/2012 trickled down to Uganda, according to the latest figures from the ministry of Finance, Planning and Economic Development, up from U.S $813.27 million in the financial year 2010/2011.

Ministry of Finance figures show that migrant remittances have surpassed what Uganda earns from its major traditional export - coffee. In 2010, coffee export earnings reached U.S $371 million yet earnings from migrant remittances were U.S $777.47 million. In 2011, earnings from coffee were U.S $444.21 million compared to U.S $813.27 million.

The statement from the World Bank indicates that money transfers from workers abroad has tripled in a decade and is three times larger than global aid budgets. The World Bank statement notes that for decades, it was a largely unnoticed feature of the global economy, a blip of a statistic. When the remittances increase, this supports the growth of the recipient economy.

The remittances also reflect an improvement in the export earnings. When this money comes into Uganda, it is invested in start-up businesses. As the businesses grow, this means a wider taxable capital base, which then benefits the economy.

Of the money sent by Ugandans the largest past is used to educate children and buy real estate too. Education is seen as one of the factors that are crucial in narrowing the gap between the rich and the poor.

"The amount has tripled in a decade and is now more than three times larger than total global aid budgets, sparking serious debate as to whether migration and the money it generates is a realistic alternative to just doling out aid. If remittances at the level recorded by the World Bank were a single economy, it would be the 22nd largest in the world, bigger than Iran or Argentina," the statement says.

Aid makes up a quarter of Uganda's budget. Dilip Ratha, of the migration and remittances unit at the World Bank, said that billions more in remittances were not being recorded as many people were continuing to bypass the banks and big money transfer companies that are relied on for data.

A number of countries, including the Philippines, Bangladesh and Senegal, have set up initiatives or even government ministries to manage cash sent from overseas. The Rwanda government, which has seen much of its aid cut last year over allegations it was supporting rebels in neighbouring Democratic Republic of Congo, has called on Rwandans living abroad to contribute to a new "solidarity fund", in an attempt to reduce its reliance on aid.

"It's something that has been going on since time immemorial," said Michael Clemens, a US economist who studies migration and remittances at the Centre for Global Development, a think-tank based in Washington. "But now, for example, with Skype you can see the school uniform bought with the money you sent in the morning."

But there is another side. Attention is turning to the companies scrambling to capture as much as they can from these multibillion-dollar flows. In some cases, more than 20% of money migrants send is lost to transfer fees. Globally, there are more than 214 million migrants. If they lived in one country, it would be the fifth most populous, trailing only China, India, USA and Indonesia.

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