50% Remittances Not Accounted For4 min read

The sad development is a result of the deregulation of the foreign remittances space which saw the introduction of Fintechs into the system after the passage of the Payment Systems and Services Act in 2019.

As a result, the stability of the local currency has been impacted negatively.

Banking Consultant, Dr Richmond Atuahene, told the Graphic Business in an interview that if all remittances that came into the country were properly tracked, it could have served as a major boost to the local currency.

According to a World Bank report on remittances, Ghana received US4.5 billion and US$4.7 billion in 2021 and 2022 respectively, but the Auditor-General’s Report on the Consolidated Statements of Foreign Exchange Receipts indicate that remittances for 2021 and 2022 amounted to US$2.11 billion and US$2.12 billion respectively.

Dr Atuahene said that illustrated some weaknesses in the country’s remittance data as against that of the assessment of World Bank’s remittance aggregates.

He said considering that the World Bank tracked its remittance figures from the source where these transfers were being made from, it could be concluded that the Bank of Ghana (BoG) was not tracking all remittances.

Foreign Exchange Act 

He said that could be a result of the deregulation of the sector, noting that the fintechs might not be declaring their remittances to the BoG, in a clear violation of the Foreign Exchange Act.

“When you take the World Bank report and the BoG figures, you see some discrepancies between the two.

So it’s either we are not tracking all the remittances because it seems more than half of the remittances that come into the country are not reflecting on the BoG’s balance of payment.”

“In 2019, we passed the Payment Systems and Services Act which was accompanied by a National Payment Strategic Plan which created the enabling environment for other private Money Transfer Companies (MTC) and Fintechs to play an active role in receiving remittances and it appears their activities are the reason why we are not capturing all the remittances.”

He said the Auditor General’s report made it clear that the remittance figures were captured through the 23 dealer banks in the country and made no mention of the Fintechs or MTCs which also receive remittances.

“When you go into the Foreign Exchange Act, it states categorically that no institution can hold foreign currency except BoG or the authorised dealer banks but due to the introduction of these MTCs and fintechs, people are now sending their remittances through them and they end up holding on to the foreign currencies and don’t surrender them to the BoG.”

Implications for economy 

Dr Atuahene said the holding on to the foreign currencies by these MTCs and Fintechs could be the reason why the local currency was volatile.

“If all these funds were coming into the banking system, the banks would have used it in supporting payments of imports and BoG wouldn’t have to come in to sell forex to the Bulk Oil Distributing Companies (BDCs).”

“I worked as a foreign exchange dealer in a bank and we used to go to some of these MTCs and Fintechs for foreign currencies, which is a clear indication that they have been holding on to them,” he disclosed.

He noted that countries such as Bangladesh and Sri Lanka rely solely on remittances as their main source of foreign exchange, which points to how significant it can be for the country if it is properly tracked.

Way forward

On the way forward, Dr Atuahene called for a forensic audit of all remittances that come into the country to identify all the lapses and leakages.

Dr Atuahene also advised the Ministry of Finance and the BoG to ensure the MTCs and Fintech companies in the international remittances space reimburse the Bank of Ghana’s Nostro Accounts or authorised dealer Commercial Bank with all foreign exchange components of all foreign exchange accrued as it was previously done in the early 2000s.

“The BoG must be prepared to reconcile the Nostro Accounts of all MTC and Fintech companies,” he stated.

He also recommended that the Ministry of Finance, Minister of Foreign Affairs and Regional Integration and Bank of Ghana, together with their development partners such as the World Bank, needed to come to a judgment as to whether or not remittances were likely to be a permanent phenomenon in Ghana’s Balance of Payments (BoP).

He said drawing on the experience of other countries which have managed significant inflows of remittances (Bangladesh, El Salvador, Jordan) could be an important starting point.