How Ghanaians abroad are building the national economy with remittances

By Emmanuel K. Dogbevi

Remittances from Ghanaians living abroad have become a very important component of Ghana’s economy.

By sending money home to relatives to cater for the sick, pay for education, acquire landed property and feed households, Ghanaians living abroad are building and sustaining the country’s economy.

The importance of remittances from Ghanaians abroad can be seen in the fact that it has outstripped even Overseas Development Assistance (ODA) or international aid.

Notwithstanding the fact that international aid is an important source of external finance for the government budget, the amount remitted into the country is above the total amount of ODA, consisting of loans and grants from donors.

Many of Ghana’s donors having realised that all non-income Millennium Development Goals (MDGs) are likely to be missed, scaled-up their ODA to Ghana in recent years. ODA now accounts for about 42% of the national budget.

In 2009, the Bank of Ghana reports show that remittance inflows amounted to $1.6 billion, higher than the World Bank’s recorded $1.5 billion and almost 10 times the $114 million recorded by the International Monetary Fund (IMF).

There are over 500,000 Ghanaians living in the UK alone, the British High Commission in Accra has said, and according to the World Bank, there are 111,000 Ghanaians living in the US, making Ghana the fourth country with the highest number of its citizens living in the US after Nigeria, 211,000, Ethiopia, 140,000 and Egypt, 133,000.about 1000 Ghanaian doctors living and working in the US.

There are Ghanaians living and working almost in every corner of the world in various capacities who send money home to their relatives.

In 2010, remittances or private unrequited transfers (net) in the year amounted to $2.12 billion, the World Bank Ghana Country office told ghanabusinessnews.com. And that amount exceeds the total volume of ODA that the country received in that year.

According to figures provided to ghanabusinessnews.com by the Public Relations Office of the Ministry of Finance and Economic Planning, in 2010 the total amount of ODA the country received was $1.8 billion.

The breakdown as provided by the Ministry is as follows: Grants – $612 million; and Loans - $1,242 billion.

Remittance receipts in general, according to a joint publication by the World Bank (WB) and the African Development Bank (AfDB) titled, ‘Leveraging Migration for Africa’, generate large benefits for emigrants’ countries of origin.

“At the macro level, remittances tend to be more stable than other sources of foreign exchange; their variation is often countercyclical, helping sustain consumption and investment during downturns; and they improve sovereign creditworthiness, by increasing the level and stability of foreign exchange receipts,” it says.

At the micro level, it adds, both country studies and cross-country analyses have shown that remittances reduce poverty. They also spur spending on health and education, as a result of both higher household incomes and—according to some studies—the devotion of a larger share of remittances than other income sources to these services.

In addition, the study indicates that remittances provide insurance against adverse shocks by diversifying the sources of household income. For example, a recent study finds that Ethiopian households that receive international remittances are less likely than other households to sell their productive assets, such as livestock, to cope with food shortages.

According to the Migrations Factbook 2011, published by the World Bank, the stock of Ghanaian emigrants in 2010 was 824,900 and the stock of emigrants as percentage of population was 3.4%.

And it listed the following countries as top destinations for Ghanaians; Nigeria, Cote d’Ivoire, the US, UK, Burkina Faso, Italy, Togo, Germany, Canada and Liberia.

On skilled emigration for 2000, the Factbook states that the emigration rate of tertiary-educated Ghanaians was 46.9% of the population, 924 or 37.1% of physicians trained in the country, 1,639 or 55.9% of physicians born in the country. The number of nurses that left the country was 4,766 or 24.1% of nurses born in the country.

The WB, AfDB study says many migrants transfer funds to households in origin countries for the purpose of investment. “Data from household surveys reveal that households receiving international remittances from OECD countries have been making productive investments in land purchases, building houses, businesses, improving the farm, agricultural equipment and other investments (36 percent in Burkina Faso, 55 percent in Kenya, 57 percent in Nigeria, 15 percent in Senegal, and 20 percent in Uganda; figure 4.3). Households receiving transfers from other African migrants in other African countries set up small-scale businesses, such as restaurants and beauty salons. They also invest in housing.”

The study also shows that the African diaspora has invested in service sector activities, such as import/export companies, telecommunications, and tourism and transport companies (examples include Databank, in Ghana; Geometric Power Limited, in Nigeria; Teylium, in Senegal; and Celtel, in Sudan).

It cited the results of a survey of 302 returnees conducted in 2001 which indicates that more than half of Ghanaian and 23 percent of Ivorian returnees reported returning with more than $5,000 in savings (Black and Castaldo 2007). Both studies indicate that many return migrants invest in business activity and that work experience and the maintenance of communication with friends and family while abroad facilitates the opening a business upon return.

Cassini (2005) concludes, according to the study, that the most successful Ghana-based businesses of Ghanaian migrants were owned by migrants who visited home frequently and developed social networks.

Remittances from Ghanaians abroad higher than international aid to country

By Emmanuel K. Dogbevi

Remittances from Ghanaians abroad is a major part of the country’s economy, available figures show.

And even though Overseas Development Assistance (ODA) or international aid is an important source of external finance for the government budget, the amount remitted into the country is above the total amount of ODA, consisting of loans and grants from donors.

Many of Ghana’s donors having realised that all non-income Millennium Development Goals (MDGs) are likely to be missed, scaled-up their ODA to Ghana in recent years. ODA now accounts for about 42% of the national budget.

In 2009, the Bank of Ghana reports show that remittance inflows amounted to $1.6 billion, higher than the World Bank’s recorded $1.5 billion and almost 10 times the $114 million recorded by the International Monetary Fund (IMF).

The significance of these citizens living abroad cannot be overlooked, as there are over 500,000 Ghanaians living in the UK alone and about 1000 Ghanaians doctors living and working in the US. There are Ghanaians living and working almost in every corner of the world in various capacities who send money to relatives back home.

In 2010, remittances or private unrequited transfers (net) in the year amounted to $2.12 billion, the World Bank Ghana Country office told ghanabusinessnews.com. And that amount exceeds the total volume of ODA that the country received in that year.

According to figures provided to ghanabusinessnews.com by the Public Relations Office of the Ministry of Finance and Economic Planning, in 2010 the total amount of ODA the country received was $1.8 billion.

The breakdown as provided by the Ministry is as follows: Grants – $612 million; and Loans - $1,242 billion.

Ghana’s efficient country system for aid management not complemented by donor conduct – Study

 By Emmanuel K. Dogbevi

A major new study on aid effectiveness to be published in the run-up to the High Level Forum on Aid Effectiveness (HLF-4) in Busan, South Korea has found that even theough Ghana has made significant progress in applying  Overseas Development Assistance (ODA) or international aid by using country systems, the unwillingness of donor countries to change their attitude is a drawback to achieving the objectives of the Paris Declaration (PD) and Accra Agenda for Action (AAA).

The study conducted by the European Network on Debt and Development (Eurodad), says ” While Ghana has made much progress in reforming country procurement systems, this progress does not seem to have been complemented by changes in donor conduct. Donors’ own reporting suggests that the extent to which they use country systems has not changed a great deal.”

The report to be published at the end of November 2011 focuses on six country case studies including Namibia, Uganda, Bangladesh, Bolivia, Nicaragua and Ghana.

The report titled, “How to spend it: smart procurement for more effective aid,” will be published to assess progress towards these aid effectiveness commitments. The report includes suggestions for a new and ambitious agreement in Busan and it constitutes one of the few civil society research reports ahead of the HLF4.

The report investigates how aid is actually spent, who the beneficiaries are and what the local economic impact is.

In its summary on Ghana,  titled: “For whose gain? Procurement, tied aid and the use of country systems in Ghana”,  the report argues that “the use of recipient country systems can increase the effectiveness of ODA by enhancing ownership and harmonization, reducing transaction costs and strengthening institutions.”

“Channelling ODA through country systems facilitates the alignment of aid allocation to national development plans. Using country systems is therefore a central pillar of the current aid effectiveness reform agenda as agreed on in international agreements, in particular the Paris Declaration and the Accra Agenda for Action,” it adds.

According to the report almost all of the donors interviewed for the study noted that in recent years progress has been made in improving Ghana’s public financial management and procurement systems.

“Past and ongoing reforms have enhanced donors’ confidence in the country systems, and scaled-up budget support has led to open dialogues between donors and Ghanaian authorities on the quality of the Public Financial Management (PFM) system, and how to improve it,” it says.

During interviews for the report most donors said they would channel more funds through the country system, in particular through the Multi-Donor Budgetary Support (MDBS) framework.

“However, the actual figures in the most recent official assessment, the 2008 Survey on Implementing the Paris Declaration (PD), give a different picture: the proportion of aid using country public financial management systems actually decreased to 57 per cent in 2007 from 62 per cent in 2005, contrary to the commitments made by donors,” the report says.

The report however, noted that the use of country procurement systems showed a slight increase, from 52% to 57%.

While it indicates that some donors, such as France and the Netherlands make full use of the country procurement system for all their ODA, it has been totally side-lined by others such as the USA and the African Development Bank (AfDB).

The report however says in a previous research on the use of country systems in Ghana carried out by Eurodad, it found that the US aid agencies are constrained by policies and regulations set at headquarter level. Moreover, the large number of vertical funds in Ghana, in particular in the health sector is also a contributing factor for the continued underuse of the country systems, despite an increase in their quality.

According to the report, some donors, mainly European Union (EU) Member States, explained that although they committed to using country systems as a first option, they use their own procurement procedures in cases where the procurement involves supplies or services which need to be procured internationally since they are not available on local markets.

Donor representatives also pointed to persistent structural or political constraints for using country systems. These are for example risk aversion by donor country parliaments which require that spending is visible and attributable, and well-documented and properly accounted for. Real or perceived fiduciary risks lead to the continued use of parallel implementation by donors. Some donors also continue to tie technical assistance and provide consultancies in kind rather than in cash, it said.

Citing a study by Osei Baffour titled “How tied aid affects the cost of aid-funded projects in Ghana“, in which he drew the conclusion that “there is significant mark-up on the prices of the tied funded inputs, and that the mark-up translates to a significant cost to Ghana,” the report said empirical research has shown that tied aid makes aid less efficient and less effective.

Since 2001, Ghana, the report noted  has undertaken a large number of reforms of its Public Finance Management (PFM) system in general, and the procurement systems in particular. Central is the Public Procurement Act, passed in 2003, which provides a comprehensive legal framework for public procurement. New institutions such as the Public Procurement Authority (PPA) and the Appeals and Complaints Panel have been set up to formalise and improve procurement processes, it says.

It also acknowledged that the development of software for procurement planning, a standard bid document and short –term training modules as well as the Public Procurement Model of Excellence (PPME) for assessment and monitoring have aided in enhancing the image of public procurement.

Several interviewees, the study said, explained that the PPME represents a significant step forward for monitoring the performance of public procurement entities and their compliance with the legal provisions.

The PPA and the Auditor General have indicated that the implementation of the Act has reduced leakages and led to more transparency in public spending. However, many government officials’ respondents bemoaned the delays associated with the implementation, it added.

The study therefore, recommends among others that all donors should deliver on their aid effectiveness commitments and use country procurement systems as the first option, while at the same time providing scaled-up support to strengthen local procurement capacities and improve accountability of the procurement process.

It suggests further that, where donors continue to procure themselves, they should end all practices of formal and de facto aid tying. They should also thoroughly assess their procurement practices and remove all barriers which hinder better access and participation of local economic actors, with the final aim of maximizing the share of contracts which are awarded to Ghanaian firms.

Tackling corruption is necessary for achieving aid effectiveness

By Emmanuel K. Dogbevi


For most developing countries, international development assistance (IDA) or aid is a very important component of national budgets without which a lot of development projects in health, education, water and sanitation, security, infrastructure development and transportation could not be achieved. Ghana for instance received as much as $1.2 billion in grants in 2009.

However, corruption remains one of the biggest means of revenue and income loss to developing countries.

While it is not easy to define corruption in one specific term, its different manifestations lead to loss of much needed money that otherwise could have gone to use in the public good or welfare of the majority. Corruption is an effective means of siphoning public funds into private pockets of individuals and companies.

A study by the World Bank says nearly $1 trillion is lost to corruption around the world every year.

The World Bank also says billions of dollars are lost through corruption in developing countries each year.

And for a continent like Africa that has an infrastructure financing gap of $35 billion per year, tackling corruption must be a priority. Ghana for instance requires $1.6 billion annually for its infrastructure development.

According to the World Bank, although the exact magnitude of the proceeds of corruption circulating in the global economy is impossible to ascertain, estimates demonstrate the severity and scale of the problem.

“An estimated $20 to $40 billion is lost to developing countries each year through corruption”, the Bank said in a report titled “Barriers to Asset Recovery” which was released Tuesday, June 21, 2011.

According to the U4 Anti-Corruption Resource Centre, 2007, 25% of the GDP of African states is lost to corruption. It adds that the amount lost to corruption each year totals $148 billion. And this amount it says covers the full range of corruption, from petty bribes to inflated public procurement contracts.

The World Bank, Star Report of 2007 also indicates that proceeds of corruption in bribes received by public officials from developing and transition countries are estimated to be between $20 billion to $40 billion per year, and this figure is equivalent to 20% to 40% of Official Development Assistance (ODA).

The devastating effects of corruption can be felt in poor quality of services in health, roads and education.

A Transparency International Global Corruption Report of 2006 estimates that 50% of health funds is lost to corruption. The report says this is the estimated percentage of allocated funds that do not reach health facilities in Ghana.

A UNDP report titled Accelerating Human Development in Asia and the Pacific released in 2008 says corruption accelerates the depletion of natural resources, notably primary forests and inshore fishing grounds, which many communities rely on for their livelihoods.

And citing an example, the report says the government of Indonesia has estimated that lost forest revenue costs the nation up to $4 billion a year or around five times the annual budget for the Indonesian department of health.

Corruption is also a major setback to achieving the Millennium Development Goals in many developing countries.

According to a Transparency International Report released in 2008, corruption raises the cost of connecting a household to a water network by as much as 30%, inflating the cost of achieving the MDG on water and sanitation by more than $48 billion or nearly half of annual global aid outlays.

It has been found that Ghana had met only 45% of the commitments it had pledged to improving water and sanitation in Washington DC in 2010 where the government pledged to invest $200 million a year in providing water and sanitation, which means that the country is still not going to meet its MDG target.

Corruption is a major hindrance to aid effectiveness and therefore, should be one of the issues that the 4th High Level Forum on Aid Effectiveness (HLF-4) in Busan, South Korea gives considerable attention to.

The principles of the Paris Declaration which stipulates Ownership, Alignment, Harmonisation, Results and Mutual Accountability can be effectively implemented if corruption is put on the radar.

The ideals of the Paris Declaration that it is now the norm for aid recipients to forge their own national development strategies with their parliaments and electorates (ownership); for donors to support these strategies (alignment) and work to streamline their efforts in-country (harmonisation); for development policies to be directed to achieving clear goals and for progress towards these goals to be monitored (results); and for donors and recipients alike to be jointly responsible for achieving these goals (mutual accountability) can effectively be reached if corruption is tackled.

In the same vein, the Accra Agenda for Action or AAA should also be pursued with zero-tolerance for corruption.

The AAA which takes stock of progress and sets the agenda for accelerated advancement towards the Paris targets, proposes the following three main areas for improvement:

Ownership – that countries have more say over their development processes through wider participation in development policy formulation, stronger leadership on aid co-ordination and more use of country systems for aid delivery.

Inclusive partnerships – which requires that all partners – including donors in the OECD Development Assistance Committee and developing countries, as well as other donors, foundations and civil society – participate fully.

Delivering results – that aid is focused on real and measurable impact on development.

With the counter-productive and development-eroding effects of corruption, the hard work of dedicated civil servants, citizens, honest governments and civil society in developing countries won’t amount to the money’s worth of donor countries and agencies, and development targets can’t be attained no matter how much aid money is given to developing countries if the canker of corruption is not tackled headlong.

The development of country systems and capacity development must factor the fashioning of anti-corruption mechanisms to keep an eye on the efficient and effective use of aid.