Remittances to African Countries

Worker remittances are an important source of income for many African countries. With labour markets deteriorating everywhere, many workers were forced to cut the transfers to their families, with potentially large impacts on household income, consumption at home, import taxes  and government revenue.  A number of African countries appear to be particularly dependant on remittances and for instance, in 2008 Lesotho, had a 27% remittance–to- GDP-ratio, the highest in Africa.  According to the World Bank Report, titled Outlook for Remittance Flows 2009-2011 the remittances are mainly received from neighbouring South Africa.

It is difficult to measure remittances, since a good portion is transferred informally and does not appear in official balance-of-payments statistics. However according to the World Bank, when measured in absolute amounts, in 2008 Nigeria and Egypt belonged to the top 10 worldwide recipients of remittances, with inflows of USD 10 billion to Nigeria and USD 9 billion to Egypt. Initial results (or estimates) for 2009 show that some countries experienced sharp falls in remittances, while others were less affected by the crisis.

In Egypt and Morocco, remittances appear to have declined by about 20% in the first nine months of 2009. In Kenya, remittance inflows declined by 8.5% in the first seven months of 2009 against the previous year. Senegal, Lesotho, Sierra Leone, Ethiopia, Liberia, Mauritius and Mozambique also suffered from falling remittances. In Cape Verde, remittances remained very stable in 2009 or may even have increased marginally. Significant increases are reported for Uganda from July 2008 to June 2009. According to World Bank estimates, remittances to African countries declined from almost USD 41 billion in 2008 to above USD 38 billion in 2009 (minus 6.6%).

The decline was more pronounced in North Africa than in sub-Saharan Africa. The actual decline of remittances in 2009 could, perhaps, have been even stronger than this estimate.  Overall however, remittances-to-GDP ratios (prior to the crisis) were between 8% and 11% in Nigeria, Sierra Leone, Togo, Guinea-Bissau, Senegal, Cape Verde and Morocco.  Meanwhile, Gambia, Egypt, Sudan, Comoros, and Uganda followed, with ratios between approximately 5% and 7%.

Remittances are influenced by international movement, migration of workers, and the liberalization of temporary movements of individual service suppliers under the fourth mode (mode 4) of service delivery in the WTO trade in services negotiations.  

Additional World Bank resources on remittances can be obtained here and WTO resources on Mode 4 here.