Remittances for November 2021

Remittance receipts declined again in November


  TOP$ millions
  Month Ended Year Ended  
  Nov 21 Oct 21 Sep 21 Aug 21 Nov 21 Nov 20 Shares
of totals*

Remittance Receipts 41.6 43.9 44.0 43.2 490.0 386.6 100.0
Private Transfers 37.5 39.0 39.0 38.3 437.0 351.2 89.2
Employee Compensation 3.5 3.9 4.1 4.2 46.8 29.3 9.6
Private Capital Transfer 0.4 0.9 0.8 0.6 4.9 4.7 1.0
Social Benefits 0.1 0.1 0.1 0.1 1.3 1.4 0.3

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

Total remittance receipts fell by $2.3 million (5.3%) in November 2021. Lower receipts were recorded mainly for private transfers, employees' compensation, and private capital transfers. Over the year, remittance receipts was significantly higher by $103.4 million (26.7%) at $490.0 million.

Total remittance receipts accounted for 41.8% of the total Overseas Exchange Transaction (OET) receipts. This is lower than the 62.1% share in October 2021 and is attributed to the rise in total OET receipts while remittance receipts declined.

All receipts in the Australian Dollar (AUD), New Zealand Dollar (NZD), and United States Dollar (USD) declined over the month by $1.5 million (9.0%), $1.1 million (9.4%), $0.3 million (2.5%) respectively, over the month. The depreciation of the AUD and NZD against the TOP also contributed to the decline. However, the AUD still hold the largest share of the total remittance receipts amongst Tonga's major trading currencies at 36.5%, declining from a 38.0% share in the previous month. The USD and NZD followed at 32.6% and 24.7% shares, respectively.

The share of remittance receipts transferred via banks remained at 12.6% during the month. However, the remaining 87.4% were transferred through the Foreign Exchange Dealers (FEDs). Thus, FEDs are the preferred choice for transferring remittance receipts given its ease of access, particularly through online transfers, and affordable service fees. The de-risking policy decisions by local and global banks resulting in the closure of FEDs’ bank accounts may affect remittance flows into Tonga.

Private Transfers

The private transfer receipts, mostly for family support and monetary gifts to friends and relatives, declined by $1.5 million (3.8%), driving the overall monthly decline. Private transfer receipts in AUD, NZD, and USD fell by $1.2 million, $0.6 million, and $0.3 million, respectively. However, private transfer receipts continue to hold the largest share of the total remittance receipts at 90.3% (compared to 88.9% in October 2021), highlighting the importance of family support from the diaspora towards households' financial needs.

Over the year to November 2021, private transfer receipts rose significantly by $85.9 million (24.5%), supporting the annual increase in total remittance receipts. Private transfers consistently remained at high levels despite economies abroad being severely affected by the COVID-19 pandemic.

Employee Compensation1

Receipts for compensation of employees fell over the month by $0.4 million (10.1%), due to lower receipts from seasonal workers in New Zealand and Australia of $0.4 million (39.7%) and $0.3 million (13.9%), respectively. However, other wages and salaries increased over the month by $0.3 million (29.4%).

Nevertheless, the total compensation of employees' receipts continued to rise by $17.5 million (59.8%) over the year. The receipts from seasonal workers continue to hold the largest share of the total compensation of employees receipts at 72.2% (compared to a 72.0% share in October 2021), while other wages and salaries accounted for the remaining 27.8% share. Receipts remitted from the seasonal workers in Australia and New Zealand rose by $15.6 million (277.4%) and $0.7 million (6.1%), respectively.

Private capital transfers & Social benefits

Private capital transfer receipts declined by $0.5 million (51.9%) over the month. This was due to lower receipts of private funds for household constructions and renovations by families. On the other hand, social benefits, which are mostly pension funds, slightly rose by $0.01 million (18.5%). Over the year, the private capital transfers increased by $0.2 million (3.8%) while receipts for social benefits declined by $0.2 million (11.7%).

Outlook

Remittance receipts are expected to remain at high levels with the end of year functions and holiday festivities. The global pandemic remains a downside risk to the outlook as it continues to affect our major remitting economies. The Reserve Bank will continue to monitor the trends in remittance receipts, as it is one of the highest sources of foreign exchange inflow for the Tongan economy.


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.


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