By MONITOR

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Uganda's diaspora remittance has registered 13.4 percent growth over the last 12 months which ended January 2024, according to the country's central bank head of research. 

Globally, remittances continued to be the premier source of external finance for low-income countries (LMICs) during 2023, relative to foreign direct investment and official development assistance. 

Bank of Uganda Executive Director of Research Mr Adam Mugume said the remittance grew to $1.42 billion (Ush5.5 trillion) in the 12 months to January 2024, up from $1.25 billion (Ush4.8 trillion) in the same period to January 2023.

“Personal transfers, which we usually call workers remittances, amounted to $1.42 billion in the 12 months to January 2024, up from $1.25 billion in the same period to January 2023, a growth of about 13.4 percent,” Mr Mugume said.

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Mr Mugume also said the main source of these personal transfers were from the Middle East, Europe, Americas and Africa. 

“Most of the remittances are for consumption purposes especially education, medical and other household expenditures. This suggests that households are able to smooth out their consumer expenditures using remittances. Another use of remittances is for investment, especially construction or land purchase,” he said. 

The World Bank in its latest Migration and Development report released late in December 2023, said remittances to low and middle-income countries grew by an estimated 3.8 percent in 2023, moderation from the high gains of the previous two years. 

But the report warns of the risk of decline in real income for migrants in 2024 in the face of global inflation and low growth prospects. 

Remittance to Sub-Saharan Africa is expected to have increase by about 1.9 percent in 2023 to $54 billion (Ush208.8 trillion), driven by strong remittance growth in Mozambique (48.5 percent), Rwanda (16.8 percent), and Ethiopia (16 percent). 

The World Bank said “remittances to Nigeria, which account for 38 percent of remittance flows to the region, grew by about two percent, while two other major recipients, Ghana and Kenya, posted estimated gains of 5.6 percent and 3.8 percent respectively.” 

The global lender also said fixed exchange rates and capital controls are diverting remittances to the region from official to unofficial channels. 

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Its Remittances Prices Worldwide Database show that remittance costs remain persistently high, costing 6.2 percent on average to send $200 as of the second quarter of 2023. 

“During crises, migrants have weathered risks and shown resilience to support families back home. But high inflation and subdued global growth is affecting how much money they can send,” Ms Iffath Sharif, the global director of the social protection and jobs global practice at the World Bank, said. 

“Labour markets and social protection policies in host countries should be inclusive of migrants, whose remittances serve as a vital lifeline for developing countries,” Ms Iffath added.

In 2024, dollar inflows to the region is projected to increase by 2.5 percent.

“Remittances are one of the few sources of private external finance that are expected to continue to grow in the coming decade. They must be leveraged for private capital mobilisation to support development finance, especially via diaspora bonds,” Mr Dilip Ratha, lead economist and lead author of the report, said. 

Mr Dilip said remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years, and the gap is increasing.