Remittances
The World Bank estimates that remittance flows to developing countries recovered by 8% to USD 351 billion in 2011, compared to USD 129 billion global official development assistance in 2010. These flows are likely under-reported as a large amount is sent through informal channels or in-kind. Some estimate actual remittances to be twice the official figures (IMF 2005a; World Bank 2005a; Docquier and Rapoport 2004). Up to 75% of the total remittances sent to Africa go informally, a much higher figure than for other continents (Freund and Spatafora, 2005).
The nature of remittances is different and complementary to other external financial flows. The importance of remittances in consumption, thereby reducing poverty, is widely recognised (Ratha 2003). The wider impact is not so sure. Chami et al (2003) found that remittances do not necessarily increase economic output as they typically are compensatory rather than channelled towards productive investment. They can help set up informal microenterprises which generate employment however (Gupta et al., 2007)
Total remittances to Africa in 2011 were estimated back at the pre-crisis level of about USD 41.6 billion, an increase of 5.9% over 2010. The GDP share of remittances for Africa remained stable at 2.3% in 2011, though with significant regional differences. West Africa had the highest share of remittances to GDP, 3.8% in 2011. Remittances to Southern and Central Africa represented less than 0.5% of their GDP. Remittances as a share of GDP are highest for Lesotho at 28% in 2011, followed by Gambia (11%), Senegal (10%), Togo (9%) and Cape Verde (8%). After Tajikistan, Lesotho has largest share of remittances to GDP in the world, explained by their migrant workers in South Africa.
There has been a threefold increase of remittances per capita for Africa between 2000 and 2011. Countries have different levels of dependence of remittances. Cape Verde received USD 306 per capita in 2011, followed by Lesotho (USD 291), Morocco (USD 220), Mauritius (USD 193) and Tunisia (USD 175). A more detailed regional comparison is difficult given the lack of official data on remittance flows, in particular for Central African countries.
The share of remittances to GDP for Africa has remained stable across the decade, averaging 2.4%. Figure 7 shows that remittances for West Africa increased from 2.5% of GDP to 4.8% of GDP during the period. For oil-importing countries remittances were almost twice as important in terms of GDP, averaging 3.7% of GDP over the last 10 years, compared to 2.0% for oil-exporting countries. North Africa attracts the largest amount of remittances, amounting to USD 19 billion in 2011, followed by West Africa with USD 14 billion, respectively 117 USD per capita and 46 USD per capita. Both regions amount to 80% of total remittances to the continent, a proportion that has stayed roughly the same throughout the last decade, except that West Africa has nearly doubled its share of total remittances to the continent. The two regions most affected by the crisis were North and East Africa, which saw remittances drop 12% and 16%, respectively, in 2009.
The three top recipients absorbed over 60% of total remittances to Africa in 2011. With USD 10.7 billion, Nigeria attracted the most remittances, followed by Egypt and Morocco, with USD 8 billion and USD 7.1 billion, respectively. These countries have a large migrant population in more developed countries. Nigeria and Egypt are among the top 10 countries in the world for remittance inflows in 2011. Remittances to Egypt increased an estimated 30% in 2011, boosted by the impact of high oil prices for Gulf Co-operation Council (GCC) countries. The weak Kenyan shilling in 2011 resulted in a temporary surge in remittances inflows to Kenya in 2011 from USD 1.78 billion in 2010 to an estimated USD 2.24 billion. Depreciation of the local currency can have a strong impact on remittances by increasing the purchasing power of money sent home, creating an incentive to increase the sums.
The main sources of remittances are slightly different for each sub-region. The United States and Western Europe accounted for nearly 70% of remittance flows to Sub-Saharan African countries in 2010 (28% and 41% respectively), followed by the GCC countries (9%). The Middle East and North Africa, in contrast, received nearly 40% of their remittances from the GCC in 2010.
Despite the recovery of global remittances, the World Bank estimates future growth of such transfers will remain at half of their pre-crisis average of 17.3% (2000-08), reaching USD 441 billion by 2014. The strongest downside risks are for those from Europe and the United States, because of their economies. According to World Bank calculations, remittance flows to Cape Verde, Senegal and Guinea-Bissau are most exposed to any worsening of the economy in Europe. The impact of the Arab Spring is yet unclear. Migrants from Egypt, Tunisia, Niger and Chad massively fled Libya because of the unrest, likely affecting remittances flows in 2012.
