Remittances Impacting Household Poverty in Ghana

13/11/2009
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Migrant remittances were also the focus of the African Economic Conference that is taking place in the Ethiopian capital, Addis Ababa. Remittances play a key role in boosting development efforts on the continent. With the financial crisis still affecting many economies in the world, it is likely that the continent’s development efforts will continue to suffer due to declines in Diaspora remittances.

According to latest estimates, remittances to sub-Saharan Africa will decline by 8.3% in 2009; a situation which will definitely have an impact on the economies of recipient countries. Remittances have grown to such an extent that in many African countries they have become among the most important foreign revenue earners. Ghana, a typical example, has seen remittances growing from 31 million dollars in 1999 to 1.4 billion dollars in 2002.

Remittances and Poverty in Ghana, a paper presented by Kwabena Gyimah-Brempong, from the Department of Economics at the University of South Florida, and Elizabeth Asiedu, from the Department of Economics, at the University of Kansas, discussed the impact remittances were having on Ghanaian households. They quoted a paper which argued that “remittances must be seen as a contingent flow from a joint family decision to send its young children abroad in exchange for financial flow from the emigrant to smoothen the family consumption.”

They said international remittances improved the living standards of Ghanaian households to the extent that they helped those households to stay out of poverty.

Remittances also contributed to formation of human capital at the household level. Households that received remittances, sent their children to primary and even secondary schools, the study indicated. They said remittances would also have long-term effects if recipient families could spare some money to invest.

If remittances are improving the living standards of households, they argued, that offsets some of the cost developing countries are said to incur when they lose their young and bright children, often educated at public expense. Remittances could have a major policy implication, according to their paper, if the gender of the head of the recipient household makes a difference in the effect of the remittance.

The gender effect of remittances and its impact on children being able to go to school, they say, have indicated that global remittances have significant and positive effects on long-term poverty reduction in Ghana.

Written by Ayenew Haileselassie