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Remittance receipts remain above $30 million amidst COVID-19 pandemic

02/23/2021 | 05:14am EST

Remittances for November 2020

Details Category: Economic ReleasesLast Updated: 23 February 2021
TOP$ millions
Month Ended Year Ended
Nov 20 Oct 20 Sep 20 Aug 20 Nov 20 Nov 19 Shares
of totals*
Remittance Receipts 37.0 38.7 36.0 36.5 386.6 348.9 100.0
Private Transfers 33.0 35.5 33.0 33.5 351.1 317.6 90.8
Employee Compensation 3.3 2.8 2.6 2.3 29.3 23.6 7.6
Private Capital Transfer 0.7 0.3 0.3 0.4 4.7 5.9 1.2
Social Benefits 0.1 0.1 0.1 0.2 1.4 1.8 0.4
* Based on year ended remittance receipts numbers
Source: National Reserve Bank of Tonga | Banking System | Foreign Exchange Dealers

In November 2020, total remittance receipts fell by $1.6 million (4.2%) as private transfers declined and outweighed the rise in employees' compensation and private capital transfers. However, the monthly remittance receipts for November 2020 was higher compared to November 2019 at $29.0 million. Over the year, remittance receipts was significantly higher by $37.6 million (10.8%) and recorded a total of $386.6 million.

Total remittance receipts accounted for 52.7% of the total Overseas Exchange Transaction (OET) receipts. This is lower than the 55.3% share in October 2020 and attributed to the rise in total OET and the decline in remittance receipts.

The receipts in the Australian Dollar (AUD) and United States Dollar (USD) declined by $2.8 million (19.7%) and $1.8 million (12.0%) respectively over the month. In contrast, receipts in New Zealand Dollars (NZD) rose by $0.8 million (10.1%) in line with the appreciation of the NZD against the TOP. Hence, the USD's depreciation against the TOP during the month also contributed to the decline in USD receipts. Nonetheless, the USD continued to hold the largest share of the total remittance receipts amongst Tonga's major trading currencies at 35.4%, declining from a 38.6% share in the previous month. The AUD and NZD followed at 30.5% and 24.2% shares, respectively. The share of remittance receipts transferred via Banks rose by 1.9% during the month to 13.8%. However, the remaining 86.2% were transferred through the Foreign Exchange Dealers (FEDs). Thus FEDs continue to be the preferred choice for transferring remittance receipts given its ease of access, particularly through online transfers and affordable service fees.

Private Transfers

The private transfer receipts, mostly for family support and monetary gifts to friends and relatives, declined by $2.6 million (7.2%) over the month. The fall in private transfer receipts in AUD and USD by $3.0 million and $1.8 million were the drivers of the monthly movement, outweighing the $0.6 million rise in NZD receipts. In addition, the decline of personal income recorded in the US for November 2020 may contribute to the decline in USD receipts for the month. Nevertheless, private transfer receipts continue to hold the largest share of the total remittance receipts at 89.0% (compared to 91.8% in October 2020) signifying the importance of overseas family support towards households' financial needs.

Over the year to November 2020, private transfer receipts rose significantly by $33.5 million (10.5%) supporting the higher annual movement of total remittance receipts. Although economies abroad have been heavily disrupted by the COVID-19 pandemic, Tongan families abroad continue to provide financial support to their loved ones in Tonga. Moreover, Tonga's international border lockdown resulted in local foreign exchange dealers not accepting foreign cash. The Tongan diaspora overseas has resorted to remit funds through private transfer receipts to their respective families.

Employee Compensation1

In November 2020, employees' total compensation rose by $0.5 million (19.0%) to $3.3 million, driven mainly by the $0.4 million (24.3%) rise in receipts from seasonal workers in New Zealand and Australia. The departure of seasonal workers in the previous month to Australia may have contributed positively to the monthly movement. Total receipts from seasonal workers contributed $2.1 million while other wages and salaries receipts from local and foreign employees of international organizations in Tonga contributed $1.1 million to the total employee compensation receipts during the month.

Meanwhile, the total compensation of employees' receipts continues to rise by $5.7 million (24.3%) over the year to November 2020. The receipts from seasonal workers continue to hold the largest share of the total compensation of employees receipts at 59.5% (compared to 57.2% share in October 2020) while other wages and salaries accounted for the remaining 40.5% share. Hence, New Zealand seasonal workers remitted $11.7 million while $5.6 million was by seasonal workers from Australia. Receipts remitted from New Zealand and Australia both rose by $2.6 million (28.6%) and $3.4 million (156.3%) respectively.

Private capital transfers & Social benefits

Private capital transfers receipts rose by $0.3 million (103.1%) in November 2020. These are receipts mostly for household constructions and renovations which may indicate households' preparations for the holiday season. Social benefits which are mostly pension funds slightly rose by $0.05 million (61.7%) during the month. Annually, both the private capital transfers and social benefits declined by $1.3 million (21.2%) and $0.4 million (20.4%) respectively.

Outlook

As the COVID-19 crisis lingers, the return of business activities to pre-pandemic levels remain very uncertain. However, with the approval of COVID-19 vaccines for public use, business confidence is expected to improve along with the ease of restriction measures in most countries abroad. The recent departure of seasonal workers to Australia and the recovery of economies abroad provide a positive outlook to the inflow of remittances in the upcoming months. With these developments, the Reserve Bank will continue to monitor the impacts of COVID-19 as well as domestic and external developments on remittance receipts, as it is the largest source of foreign exchange inflow for the Tongan economy.

TOP$ millions
Month Ended Year Ended
Nov 20 Oct 20 Sep 20 Aug 20 Nov 20 Nov 19 Shares
of totals*
Total 37.05 38.69 35.99 36.46 386.55 348.94 100.0
Australian Dollar (AUD) 11.30 14.07 11.63 12.10 116.28 96.42 30.1
US Dollar (USD) 13.12 14.92 13.58 14.15 152.90 139.95 39.6
New Zealand Dollar (NZD) 8.95 8.13 9.09 8.77 97.39 92.16 25.2
Tongan Pa'anga (TOP) 1.47 0.90 1.07 0.84 11.76 12.80 3.0
Euro (EUR) 0.16 0.21 0.25 0.20 1.89 1.86 0.5
Japanese Yen (JPY) 0.07 0.14 0.14 0.12 1.41 1.73 0.4
Fijian Dollar (FJD) 0.05 0.06 0.06 0.07 0.95 1.68 0.2
British Pound (GBP) 0.10 0.12 0.07 0.09 0.82 0.63 0.2
Chinese Yuan (CNY) 0.00 0.00 0.00 0.00 0.01 0.00 0.0
Other 1.83 0.13 0.11 0.13 3.14 1.71 0.8

* Based on year ended remittances receipts numbers
Source: National Reserve Bank of Tonga | Banking System | Foreign Exchange Dealers

1 - Employee compensation is the sum of wages and salaries from the seasonal workers abroad, Tongan residents working short term overseas, and resident employees serving foreign organizations.

Remittances Releases

Remittances Releases for 2020

Disclaimer

National Reserve Bank of Tonga published this content on 05 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 February 2021 10:13:06 UTC.


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