National Reserve Bank of Tonga

Remittances Receipts for February 2023

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Category: Economic Releases
Created: 19 May 2023
Last Updated: 29 May 2023

Remittance receipts continue to remain lower in February
  TOP$ Millions
 
  Month-ended Year-ended
 
  Feb-23 Jan-23 Dec-22 Nov-22 Feb-23 Feb-22
Total 37.5 37.6 52.5 42.4 494.9 490.8
Private Transfers 33.2 33.9 48.2 38.4 443.6 438.5
Compensation of Employees 3.3 3.6 4.2 3.9 46.5 46.4
Private Capital Transfers 1.0 0.1 0.1 0.1 3.9 4.8
Social Benefits 0.1 0.1 0.1 0.1 1.0 1.1
  Shares of totals Shares of GDP Shares of Total Receipts Shares of Total OET
Total 100.0 40.3 51.7 26.8
Private Transfers 89.6 36.1 45.8 23.7
Compensation of Employees 9.4 3.8 4.6 2.4
Private Capital Transfers 0.8 0.3 1.3 0.7
Social Benefits 0.2 0.1 0.1 0.0

On a monthly basis, February 2023’s remittance receipts continued to decline by $0.1 million (0.4%) to $37.5 million. Funds received from private transfer and compensation of employees drove the overall monthly decline with declines of $0.7 million (2.1%) and $0.2 million (6.9%) respectively. The slowdown in the economy of most of the trading partners’ countries amidst still high global inflation may have contributed to the slowdown in remittances during the month. Nevertheless, total remittance receipts for the month represented 51.7% of the total Overseas Exchange Transactions (OET) receipts.

However, over the year, total remittance receipts recorded a growth of $4.1 million (0.8%) as the country returned back to normal activities after the HTHH disaster in the previous year. The outpour of remittances from the Tongan diaspora to family members to help them as they recover from the HTHH calamity as well as the national lockdowns from COVID-19 are seen to be the main contributors to the annual positive growth in remittances.

Remittance receipts in US Dollar (USD) increased by $1.1 million (8.2%), while receipts in Australian Dollar (AUD) and New Zealand Dollar (NZD) declined by $0.07 million (0.5%) and $0.9 million (10%) respectively over the month. This coincides with the general appreciation of the TOP against all major trading partners’ currencies except for the US dollar in February. Cyclone Gabrielle also affected Australia and especially New Zealand in February, which may have also contributed to the declines from these respective countries. The remittances in USD continue to hold the highest share of remittance receipts at 39.7%, followed by the AUD and NZD at 33.9% and 22.1% respectively. However, with respect to source countries for remittances, Australia hold the largest share followed by United States and New Zealand. Data shows that many non-US countries are sending their remittances to Tonga denominated in USD. There are also remittances sent from Australia and New Zealand in USD.

Foreign Exchange Dealers (FEDs) continued to be the preferred channel for remittance receipts both monthly and annually with 86.6% and 89.1% share respectively. This is mainly attributed to its affordable service fees and ease of access. However, the share of remittance transferred via banks slightly increased over the month to a total share of 13.4%.

Private Transfers

During the month, private transfer receipts declined by $0.7 million (2.1%) stemming from decline in fund receipts in New Zealand dollar. This coincided with the disruption in the New Zealand’s economy due to severe disasters during the month, which may lead to increase in inflation and reduce income of the Tongan diaspora in New Zealand. Meanwhile, private transfers in USD and AUD both increased by $0.4 million (2.9%) and $0.1 million (1.3%) respectively. Private transfer receipts still hold the largest share of total remittance receipts at 88.5% despite declining from the 89% share in February 2022.

Over the year to February 2023, private transfer receipts rose by $5.1 million (1.2%) and accounts for 89.6% of the total annual remittance receipts. This indicates the significant financial support from the families and relatives overseas due to the HTHH events and the outbreak of the pandemic here in Tonga.

Compensation of Employees

Total compensation of employees declined by $0.2 million (6.9%) over the month as the receipts from seasonal workers slowed down during the month by $0.4 million (18.3%). The decline in receipts from seasonal workers outweighed the slight increase in receipts from other wages and salaries, mostly from expatriates of international organizations in Tonga. Seasonal employees’ income has a 4.8% monthly share in the total remittances in February 2023.

In year ended terms, total receipts from seasonal employees declined by $0.05 million (0.1%) largely attributed to a $0.1 million (0.4%) decline in the receipts from Australia’s seasonal workers offsetting the $0.04 million (0.6%) increase from New Zealand’s seasonal workers. Seasonal worker’s receipts contributed 6.5% to total annual remittance.

Overall, the total compensation of employees rose by $0.02 million (0.04%). However, more seasonal workers are expecting to depart Tonga for Australia in the near future as Tonga has developed from low-skilled to semiskilled and other sectors apart from horticulture (PALM), this may continue to support the inflow of seasonal workers receipts to the country.

Private capital transfers & Social benefits

Private capital transfers slightly rose by $0.8 million (710.1%) over the month while social benefits, which are mostly pension funds, declined by $0.01 million (21.6%). Over the year to February 2022, both private capital transfers and social benefit declined by $0.9 million (17.9%) and $0.2 million (13.9%) respectively.

Outlook

Remittance receipts have moderated from record highs and are expected to return to pre-COVID levels in the near to medium term, partially offset by the increase in travel receipts in line with the recovery in the tourism industry. However, the introduction of the accredited employer work visa in New Zealand and the development of new sector agreements with implications for increased demand for Tongan workers is expected to buoy and contribute to the inflow of remittance. The Reserve Bank will continue to closely monitor developments in remittance receipts as the highest source of foreign exchange inflow for the Tongan economy.

Remittances Releases

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