The Power of Remittances: How Ghana's Expatriates Are Supporting the Economy and What More Can Be Done

In 2024, Ghana is expected to receive an estimated US$11.5 billion in remittances from Ghanaians living abroad. These remittances—officially recorded flows and informal transfers sent through friends, family members, or couriers—significantly supported the nation's foreign reserves and helped stabilize the cedi. Beyond this, remittances have become one of Ghana's most significant sources of foreign earnings, ranking second only to gold and other exports.

This article discusses remittances' contributions to Ghana's economy, their percentage share of total foreign exchange inflows, how much they would need to increase to replace external borrowing, the effect of cedi appreciation on both remittance inflows and the broader export economy, and strategies Ghana can adopt to grow remittances, drawing lessons from countries like the Philippines and Mexico.

The Economic Power of Remittances
Remittances are money that Ghanaians living and working abroad send to their families back home. These funds are typically used for essential needs, including food, rent, education, healthcare, and business investments. In 2024, Ghana officially recorded US$6.65 billion in remittance inflows. But when we include informal remittances—those not tracked by banks or money transfer services—the total amount rises to an estimated US$11.5 billion.

This is a substantial amount compared to Ghana's total foreign exchange earnings, which encompass exports of goods and services, as well as remittances. In the same year, Ghana earned about US$20.4 billion from merchandise (goods) exports and about US$6–8 billion from services exports. This brings Ghana's total foreign earnings in 2024 to around US$36–42 billion. These figures indicate that remittances accounted for approximately 27% to 32% of Ghana's foreign earnings. This means that nearly one-third of all the dollars Ghana receives from outside the country come from the pockets of ordinary Ghanaians living abroad, not from cocoa, gold, or government loans.

Can Increased Remittances Replace External Borrowing?

In 2024, Ghana borrowed approximately US$2–4 billion from abroad, primarily from institutions such as the International Monetary Fund (IMF), the World Bank, and other development lenders. Borrowing helps the government finance its budget, pay off old debts, and support the cedi. However, borrowing from abroad also increases Ghana's debt stock and leads to future interest payments, which can strain the economy.

One interesting question is this: Could Ghana avoid external borrowing if it increased its remittances? The answer is yes—at least in theory. If Ghana were to increase its total remittances from US$11.5 billion to US$14.5 billion, it could fill the US$3 billion gap currently covered by foreign loans. This would require a 26% increase in remittance inflows. While this is not an easy target, it is not impossible either, especially when we consider how other countries have successfully increased remittances through effective national strategies and policies.

How Cedi Appreciation Affects Remittances and Exports

While the appreciation of the Ghanaian cedi is good news for the economy as a whole, it has some mixed effects on remittances and the country's export economy.

Effect on Remittances: When the cedi appreciates, one U.S. dollar converts into fewer Ghana cedis. For example, if the exchange rate moves from GH₵14 to GH₵12 per dollar, a remittance of US$100 now gives the receiver GH₵1,200 instead of GH₵1,400. That is a loss of GH₵200 in local value. This drop in value reduces the purchasing power of families who rely on remittances to cover expenses such as food, rent, or school fees. Even if the prices of some imported goods also fall because of the stronger cedi, many local expenditures, such as rent and transportation, may not change quickly. This situation can discourage some senders from sending as much money or push them to delay remittances while they wait for a better exchange rate.

Effect on Exports: The Cedi's appreciation also makes Ghanaian goods more expensive internationally. When the cedi is strong, the cost of Ghanaian exports—like cocoa, gold, textiles, and crafts—rises in dollars or euros. For example, if a cocoa product that previously sold for US$100 now costs US$116 due to cedi appreciation, buyers in foreign countries may reduce their purchases or switch to cheaper suppliers elsewhere. This can lead to declining export volumes, lower income for Ghanaian producers, and less foreign exchange flowing into the country. This effect is known in economics as a "loss of export competitiveness." If not carefully managed, a strong cedi—while helping fight inflation and reduce import costs—can undermine the sectors that generate foreign earnings, leading to a weaker trade balance over time.

How Ghana Can Grow Remittances: Lessons from the Philippines and Mexico

Countries like the Philippines and Mexico have built strong systems to encourage remittances and maximize economic benefits. Ghana can learn from their successes. Here are a few strategies the government can adopt:

Lower the Cost of Sending Money: Many Ghanaians abroad use informal methods because formal money transfer channels, such as banks and Western Union, charge high fees. The government can collaborate with banks and fintech companies to reduce transfer costs, making it more affordable and secure for people to send money through authorized channels.

Create Diaspora Investment Programs: The Philippines offers special diaspora bonds, housing schemes, and investment opportunities for Filipinos abroad. Ghana can achieve the same by creating secure savings and investment products that enable Ghanaians abroad to invest in local businesses, real estate, or government projects.

Develop a Comprehensive Diaspora Engagement Policy: Mexico maintains active communication with its diaspora through its embassies, consulates, and cultural outreach initiatives. Ghana should develop a clear diaspora strategy that includes representation, regular consultations, and special privileges or incentives for returning migrants and overseas investors.

Enhance Banking and Mobile Platforms: By expanding access to digital wallets, mobile banking, and cross-border payment platforms, Ghana can facilitate the receipt and utilization of remittances without delays or additional charges.

Linking Remittances to Development Goals: The government can encourage remittance-backed community projects, such as schools, health centers, or clean water systems, by matching funds or providing tax relief to donors.

Conclusion: Tapping Into a Lifeline without Undermining Growth

Remittances from Ghanaian expatriates are not just gifts from family members—they are a lifeline for households and a pillar of the national economy. In 2024, they made up almost a third of Ghana's foreign earnings. If increased by just 26%, they could cover the country's annual external borrowing needs. The way forward lies in strategy, not chance. Ghana must take concrete steps to reduce the cost of money transfers, build trust with its diaspora, and create real investment opportunities. Doing so can unlock the full power of remittances—not just as household income but as a national development tool that reduces debt, supports stability, and builds a stronger future for all Ghanaians.