#1ENTRAL BANK OF MNTS HOLI ESWATINI CENTRAL BANK OF ESWATINI Umntsholi Wemaswati Remittances Experiences in Eswatini Presentation at AACB 2021 Continental Semina Melvin Khomo (PhD) Head of Financial Markets 31 May 2021#2BANK ATIN CENTRAL BANK OF ESWATINI Umntsholi Wemaswati Presentation Outline Introduction - Remittances Importance Eswatini Experiences Challenges & lessons#3BANK ATINI CENTRAL BANK OF ESWATINI Umntsholi Wemaswati Introduction emittances - generally defined as a share of labour earnings that a migrant worker nds home to support his/her family (normally cross border) mittances facilitate consumption, education, investment and overall poverty redu hence a critical component of development finance for low income countries mittances also provide source of FX reserves for countries plus indirect governme venue via taxes (e.g. VAT) - veral studies indicate that remittances are critical for poverty alleviation see Rich ams, 2011 for summary of the literature - Adams (2011): Evaluating the economi pact of International Remittances on Developing Countries using Household Surve erature review, Journal of Development Studies 47(6)#4BANK ATINI CENTRAL BANK OF ESWATINI Umntsholi Wemaswati DEMOCRATIC REPUBLIC OF THE CONGO ANGOLA ZAMBIA Eswatini Context...... BURUNDI TANZANIA 0 N 500 MILES MALAWI ZIMBABWE NAMIBIA BOTSWANA Equator SOUTH AFRICA MADAGASCAR MOZAMBIQUE LESOTHO Swaziland now named eSwatini INDIAN OCEAN MARK NOWLIN / THE SEATTLE TIMES ■ Small landlocked country bordering S Africa (3/4) and Mozambique ■ Strong economic and trade links with Africa ■ Local currency (Lilangeni) pegged 1:1 South African rand ■ About 71% of people reside in non-u areas & main source of income for ad (24%) is remittances (CFI, 2019) Proportion of financially included adu at 85% (CFI, 2019) ■ In-country remittances (mobile mone payments) main driver for financial in - 94% of adults have cellphones (CFI,#5BANK ATIN CENTRAL BANK OF ESWATINI Umntsholi Wemaswati Eswatini Context…..... rall rising trend in remittance ws over past decade 800.00 -REMITTANCES (inflows) ntry received about E600 million arly average) remittances over the years 700.00 600.00 atini also negatively affected by d-19 - economic shock 500.00 E'MILLIONS 400.00 atini remittances declined 18% in 300.00 O, lower that 20% expectation from d Bank 200.00 100.00 losses in main remitter market, 0.00 omic lockdowns & travel restrictions nd decline 2011 2012 2013 2014 2015 2016 2017 2018 2019#6mars-19 avr.-19 mai-19 FX Reserves 19,0444 BANK ATIN CENTRAL BANK OF ESWATINI Umntsholi Wemaswati Eswatini Context...... USD/SZL Exchange rate 14,6093 /2020 4/30/2020 6/30/2020 8/31/2020 10/31/2020 12/31/2020 2/28/2021 4/30/2021 juin-19 juil.-19 août-19 sept.-19 oct.-19 nov.-19 déc.-19 janv.-20 févr.-20 mars-20 avr.-20 mai-20 GOR Import Cover (RHS) juin-20 juil.-20 août-20 sept.-20 oct.-20 nov.-20 déc.-20 janv.-21 févr.-21 mars-21 avr.-21 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 13,9245 MONTHS ■ Exchange rate volatility preva 2020 during (SZL/ZAR) Wild swings in ZAR mainly in response to covid-19 induced global capital market conditio Eswatini's gross FX reserves anchored in 2020 ■ Other factors besides remitta influence reserves levels At less than 1% of GDP, remittances thus far have lim impact on FX reserves#7BANK ATINI CENTRAL BANK OF ESWATINI Umntsholi Wemaswati Challenges Challenges & Lessons ini has challenge of low remittances S e of informal channels gaps ransaction costs? Possible solutions Diaspora engagements Easing of restrictions & regulations Lowering transaction costs Engagements with sending nations (S initiatives), which would allow for validation through mirror data. Fintech - digital cash? Capacitating countries to undertake household surveys to estimate inform aspect of remittances#8BANK ATIN CENTRAL BANK OF ESWATINI Umntsholi Wemaswati THANK YOU