Let’s leverage remittances for economic growth
This year’s third edition of the Graphic Business/Stanbic Bank Breakfast Meeting took place last Tuesday at the Labadi Beach Hotel during which experts shed light on the vital role remittances play in driving Ghana's economic development.
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Despite their significance, remittances often receive inadequate attention. According to the Bank of Ghana (BoG), remittances from abroad are a lifeline for many Ghanaian families, covering essential expenses such as education, health care, rent, household upkeep, building and utilities.
Moreover, remittances often serve as a vital source of seed capital for entrepreneurs looking to start a business or expand existing ones.
The significance of remittances is further underscored by the staggering $54 billion that flowed into Sub-Saharan Africa alone in 2023, highlighting their immense potential to drive economic growth and development in the region.
The World Bank reports that Ghana, in the same period under review, recorded a remittance-to-Gross Domestic Product (GDP) ratio of $4.89 billion, highlighting the key role remittances play in supporting the livelihoods of individuals living in the country, which represents 6.4 per cent of the country's GDP.
By comparison, the Daily Graphic is aware that Kenya is expected to utilise remittances to continue providing vital support for the country's balance of payments position, consumption and investment, having received remittances equivalent to four per cent of Kenya's GDP.
This example, among other instances, is a clear demonstration of the fact that Ghana can also benefit in the same way if the right measures are put in place to harness the potential.
As was revealed, almost $5 billion in remittances flowed into the economy, but just about half of the figure went through the formal system.
There are many reasons for this and the paper shares in the advice offered during the meeting that there is a need for the BoG to create a more conducive environment that makes it simpler, safer and more affordable for people to use the formal system.
As expressly indicated by the key speaker at the event, Yaw Appiah Lartey, Partner and Africa Leader for Infrastructure & Capital Projects (I&CP) and Economic Advisory in Deloitte Africa Financial Advisory Unit in Deloitte Ghana, remittances were often used to support essential consumption such as food and investment in physical and human capital.
The Daily Graphic is also aware that remittances received by many African countries exceed Foreign Direct Investment and are used to fund vital activities such as education, health and housing. Remittances are a crucial element of development, food security and poverty reduction in African countries.
This is why the Daily Graphic believes that targeted government policies to facilitate remittance inflows will immensely help reap the full benefit of the practice.
Against this background, there is also the need for BoG to continue strengthening regulations for remittance institutions. This will improve tracking of compliance and safeguard senders and recipients of remittances from fraud and financial abuse.
We agree that Ghana, as a country, needs to develop and implement avenues that efficiently track the flow of remittances in and out of the country. These avenues should verify the identity of each customer, monitor transactions and flag any suspicious activities to prevent money laundering and terrorist financing.
Finally, we also believe that there is a need for the government to implement initiatives to educate the public, especially individuals in rural areas, on the benefits of using formal remittance channels and put measures in place to ensure a seamless transaction from unofficial to official channels.
While we expect this conversation to continue until the right measures are put in place to fully leverage the benefits, we express our gratitude to Stanbic Bank for the continuous support for our thought-leadership programmes.