RemittancesCompilation practices and

BPM6 Implementation

Skopje, 2 -5 October 2013

Majela Collaku, Expert, Bank of Albania

Bank of Albania

General Characteristics

Area: 28 748 km2

Population : 2.8 million

Capital: Tirana

Neighbor countries: Kosovo, Macedonia, Montenegro, Greece and Italy.

GDP/Capita: $3,900 (2012 est.)

Skopje, 2 -5 October 2013

Introduction

Albania is a remittances recipient country,

immigration phenomenon became evident for the very first time by mid 1990,

around 1.2 million Albanian migrants,

680 million of euros inflow of workers’ remittances for 2012,

7 % of GDP,

34 % of Trade Balance.

Main destination : Italy and Greece

Skopje, 2 -5 October 2013

Main Source: Residual Model

Complementary source : Surveys

Basic Assumptions of Residual Model:

First: The money remitted by migrants in the home country is converted into domestic currency (ALL) and used to buy goods and services.

Second: Foreign exchange market is in equilibrium, which means that, the amount of foreign exchange inflows is equal to the outflows.

FX INFLOWS = FX OUTFLOWS

Compilation Methodology

Skopje, 2 -5 October 2013

Residual Model

Cash remittances (unknown) (CR)

Cash exports* (CE) Cash imports** (CI)

Cash travel (credit)* (CTC) Cash travel (debit)* (CTD)

Other cash exports in services * (OCE) Other cash import in services * (OCI)

Other inflows of FX*** (OIFX) Other outflows of FX*** (OOFX)

Foreign Exchange Inflows = Foreign Exchange Outflows

* Not channeled through banking system ** Total imports - imports through banks – trade credit – aid – good for processing imports)*** The net change in the position of FX holding by banks and exchange bureaus

CR = CI + CTD + OCI – CE – CTC – OCE + NetFX (OOFX-OIFX)

RB = Remittances reported by banks and MTO’s

ER= CR + 20% x RBER: estimated remittances

On BoP it is applied:

ER * 0.9 = workers’ remittances and ER * 0.1 = compensation of employees.

Data Sources

Custom data

Surveys (travel, smuggling, trade credits).

Banking system / MTO

Foreign exchange bureaus data

Estimations

Skopje, 2 -5 October 2013

Limitations of Residual Model

Relies on accuracy of data on which estimation is based (any errors and omissions in that data will be reported as remittances)

Cash balances of domestic sectors are difficult to estimate (private sector holds undisclosed amounts of foreign currency)

Cannot distinguish between purposes for which money are sent (money could be sent for deposits in migrant accounts or purchase of assets)

Skopje, 2 -5 October 2013

Complementary Sources - Surveys

Quarterly survey on households (recipients of remittances)

Temporary suspended due to the lack of a reliable register of households. Planned to be resumed based on data from the Population Census of 2011.

Meanwhile a new pilot survey on migrants is introduced in 2011.

So far, data retrieved from both surveys are not applied

on BoP components, but are considered as complementary source for analytical purposes.

Skopje, 2 -5 October 2013

Complementary Sources – Surveys (Cont’ed)

Dimensions of surveys:

Geographic Location.Characteristics of the emigrants/recipient householdsEmigrant’s monthly income Amount remitted as percentage to monthly/annually

incomeFrequency of the remittances.The channels used to remit.The use of the remittances.

Skopje, 2 -5 October 2013

Remittances-new concepts and definitions

BPM6 introduces 4 aggregates:

1. Personal transfers (narrowest)2. Personal remittances3. Total remittances4. Total remittances and transfers to NPISHs (broadest)

Skopje, 2 -5 October 2013

Remittances-new concepts and definitions (cont’ed)

Skopje, 2 -5 October 2013

“Personal transfers” will cover all current transfers between resident and nonresident households.

The concept is based neither on migration nor employment status.

Personal remittances are the sum of personal transfers and compensation of employees less taxes, travel expenses etc.

Skopje, 2 -5 October 2013

Remittances-new concepts and definitions (cont’ed)

BPM5-BPM6 changes

Main changes introduced in BPM6 regarding remittances:

Introduction of the concept of “personal transfers” to replace “workers remittances” in the BPM5;

Definition of personal remittances and its introduction in the balance of payments as a memorandum item;

Change in recording of migrants’ transfer.

Skopje, 2 -5 October 2013

Remittances-BPM5 and BPM6 Presentation

Personal Transfers = Worker’s Remittances in BPM5 Personal Remittances = Household-household transfers +

net compensation of employees. Total Remittances = Personal Remittances + Social

BenefitsBPM6 presentation ( Million of Euros) 2010 2011 2012

Personal Transfers (BPM6) 696.5 669.6 680.2

Personal Remittances (BPM6) 871.4 808.2 798.6

Total Remittances (BPM6) 871.4 808.2 798.6

BPM5 presentation ( Million of Euros)

Worker’s remittances 696.5 669.6 680.2

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Data Availability by Components

Compensation of employees - Model Personal transfers – MTO, BANKS, Model Travel and transportation related to temporary employment

- Not Available Taxes and social contributions related to temporary

employment –Not Available Capital transfers between households – Banks ITRS Social benefits – Not Available Current transfers to NPISHs – Not Available Capital transfers to NPISHs - Not Available

Skopje, 2 -5 October 2013

Implementation Plans

BoA will follow closely the remittances performed through formal channels (MTO, Banks)

Revision of existing model/design of a new modelConduct new survey on migrants (adding additional

question regarding travel expenses, social contributions, salaries etc.)

Corporation with National Statistical Agency (INSTAT) and other institutions for more reliable data.

More aggregated data from banks and MTOBilateral data sourcesAdditional data sources.

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THANK YOU FOR YOUR ATTENTION!

Skopje, 2 -5 October 2013