Remittance Flows to the Horn
Exposure to Shocks in the Gulf
Inspired by the excellent work by Afshin Molavi for the Arab Gulf States Institute in Washington (AGSIW), I used the preliminary 2019 data of the World Bank’s Bilateral Remittances Matrix (still unpublished as of today, but previous data are available here) to examine the GCC-HOA remittance flows.
Trouble Foretold: Dependency on Remittance Flows
As a premise, remittances have recently become the largest source of external financing 📈 in developing countries, having overcome also foreign direct investments. So, they do matter.
And they do so also in the eastern lands of Africa, where they are both a blessing and a curse. Preliminary data for the year 2019 on remittance flows to the greater Horn of Africa — Egypt, Sudan, Ethiopia, Eritrea, South Sudan, Djibouti, Kenya, Somalia — clearly show significant dependency on the economies of the Gulf region (GCC, Gulf Cooperation Council):
• 64% of total HOA remittances hail from the GCC
• two countries alone, Saudi Arabia and the UAE, account for 45% of all the incoming remittances
• looking at the region’s individual countries, percentage shares of remittances hailing from GCC economies vary a lot, from a peak of 75% in Egypt to 0% in Djibouti and Kenya, with Sudan’s 47% and Ethiopia’s 23% in between.
These numbers are not unexpected in light of UNDESA estimates for the HOA migrant stock present in GCC countries (estimates for the year 2019, which yet do not capture irregular migration 📈):
• 1.6 million in Saudi Arabia (5% of total Saudi population)
• 1.1 million in the UAE (11%)
• 473k in Kuwait (11%)
• 222k in Qatar (8%)
• 105k in Oman (2%)
• 97k in Bahrain (6%)
What are the obvious implications of such dependency? That the current covid-induced economic slowdown across the Gulf is going to have an impact not only on South Asia as shown in detail by Afshin Molavi’s research, but also on these Horn of Africa’s economies and societies. Already in early April we heard the news that Saudi Arabia was expelling thousands of Ethiopians working in the country as well as of other similar stories related to other GCC and HOA countries. It then comes as no surprise that the World Bank now estimates that in the whole Sub-Saharan Africa region, for the year 2020, remittance flows will decline by 23.1%.
Yet, not all Sub-Saharan African countries are equally vulnerable to remittance-related dependency. Dependency is based not only on the degree of over-reliance on few remittance-sending countries but also on the percentage of GDP that remittances represent for the country. Inside the greater HOA region, percentages vary from 0.5 to 10, as per 2018 or earlier official data: Djibouti (2%), Egypt (10%), Ethiopia (0.5%), Kenya (3.1%), Sudan (1%). Clearly, there is significant within-region variation, but combining all of the above data, Egypt, Ethiopia, and Sudan are likely the ones in the region which are going to be the most affected by the covid-induced shocks that are today hitting hard the GCC economies.
🧭 Explore remittances’ raw data, by searching individual receiving countries:
