Wednesday, June 19, 2024
BusinessRemittance plunges hard

Remittance plunges hard

-Experts claim as much as 80 percent dip

As the impact of the coronavirus pandemic is becoming more visible on social and economic life of the world, countries like Ethiopia are feeling the burn in terms of unprecedented decline in remittance, composed mostly of private and public transfers, further contributing to the shrinking balance of payment of the country.

The COVID-19 pandemic that has crippled the global socio-economic system is feared to have a significant impact on the three million Ethiopians in the diaspora who remit hard currency back home through both formal and informal channels. For instance, in recent years, around 4.5 billion dollars is transferred in the form of remittance to Ethiopia, annually; and out of this figure, the contribution of the diaspora, who are facing the grim realities of the COVID-19 shutdown in the Middle East, Europe and North America, is quite immense.

And hence, economic experts in Ethiopia are claiming that the coronavirus pandemic (in past three months) might have induced a decline in remittance by as much as 80 percent, with the worst outcomes yet to be seen. Official figures from the Ministry of Foreign Affairs (MoFA), which show only USD 200 million remitted to Ethiopia in third quarter of the current fiscal year as opposed to the USD 1.8 billion recorded in the first two quarters, indirectly reveal the unprecedented decline in the flow of foreign private transfers to the country.

On the other hand, even the remittance figure of the first two quarters (1.8 billion) shows a significant drop from its level last year.

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In this regard, recent reports of the National Bank of Ethiopia (NBE) indicate that remittance, mostly private and public transfers, had the biggest contribution in the decline of the overall net foreign transfer coming to Ethiopia in the first quarter of the 2019/2020 fiscal year. NBE’s figures show that transfers sustained USD 1.5 billion dip during the stated period, even before the COVID-19 crisis.

Furthermore, NBE reported a total current account receipt of USD 3.5 billion during the stated period, secured mostly from export of goods and service together with public and private transfers. However, this too was a 14 percent reduction from the USD 4.1 billion registered during the previous fiscal year.  

Selamawit Dawit, director of the Diaspora Agency under MoFA, agrees that there are considerable declines in the foreign receipts of the country this year, “but not necessarily as high as 80 percent as economists have claimed”. “First of all, we only account for the private transfers; but in the past nine months, we have seen not more than USD two billion arriving at the shores of Ethiopia. In fact, in the first six months of the current fiscal year, USD 1.8 billion was secured from the diaspora community,” the director said.

However, that being the case, individuals living abroad are having the most difficult time as COVID-19 hits the world; “they are not at work and earning nothing” noted Selamawit.

But, that as well indicates, close to 80 percent decline has already been witnessed if one dissects the USD two billion on a monthly basis. For the past six months, private receipts, as stated above, accounted for USD 1.8 billion. But during the nine month, the receipts accounted only for USD two billion, indicating a remittance of only 22 percent of the expected amount.   

The total sums of the remittance for this year is yet to be determined by External Economic Analysis and International Relations Directorate with NBE as the numbers for March and April are yet to be computed in order to determine the impacts of COVID-19 over the remittances of the country. 

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