Parallel (Black) Currency Markets and Their Potential Impact on Remittances
Parallel currency markets (or black markets) in emerging and developing economies significantly impact the value of remittances sent to these countries. As of 2023, according to the WorldBank figures there are more than two dozen countries have active parallel markets, affecting how much recipients actually receive. This article explores the implications for individuals sending money abroad and provides a comprehensive list of countries with notable parallel market premiums.
TL;DR:
- There are 24 countries have active parallel currency markets, affecting remittances.
- Sending money using official rates can result in less value for recipients.
- It's essential to compare rates and consult local sources for current information.
The Challenge with Parallel Exchange Rates: In countries with active parallel markets, the difference between the official and market exchange rates can significantly reduce the value of remittances. For example, if you send money using the official exchange rate in a country where the parallel rate is much higher, your recipient may receive less value than expected.
This disparity in exchange rates means that the money sent does not go as far as it should, affecting those who rely on remittances for their livelihood. In countries like Argentina, Ethiopia, and Nigeria (much less since summer 2023), the premium on exchange rates in parallel markets can be substantial.
Smart Strategies for Senders:
- Check Multiple Providers: Don't rely solely on official exchange rates. Compare rates from different remittance services on Sendrater.
- Consult Locally: Talk to people on the ground in the recipient's country for the most current exchange rate information.
- Stay Informed: Keep up with the latest news on currency markets in the destination country.
Below is a list of countries with significant parallel market premiums as of March 2023 (Source: The WorldBank)
| Country | Official Rate | Parallel Rate | Premium (%) |
|---|---|---|---|
| Lebanon | 15,000 | 107,500 | 616.7 |
| Yemen (Sana'a vs. Aden) | 250 | 1,230 | 392.0 |
| Syria | 3,015 | 7,550 | 150.4 |
| Iran, Islamic Republic of | 42,000 | 285,000 / 544,000 | 1195.2 / 90.9 |
| Argentina | 209 | 391 | 87.1 |
| Ethiopia | 54.4 | 100.2 | 84.1 |
| Zimbabwe | 930 | 1,600 | 72.1 |
| Burundi (as of 12/31/2022) | 2,061 | 3,359 | 63.0 |
| Nigeria | 461 | 745 | 61.7 |
| Algeria | 136 | 209 | 53.5 |
| Malawi | 1,028 | 1,495 | 45.4 |
| Myanmar | 2,100 | 2,857 | 36.0 |
| Congo, Democratic Rep. | 2,036 | 2,323 | 14.1 |
| Angola (as of 01/27/2023) | 504 | 560 | 11.1 |
| Bangladesh | 106 | 113.3 | 6.9 |
| Lao PDR (as of 02/28/2023) | 16,221 | 17,327 | 6.8 |
| Ghana | 11.01 | 11.75 | 6.7 |
| Libya | 4.79 | 5.09 | 6.2 |
| Mozambique | 64.5 | 67.4 | 4.4 |
| Ukraine | 36.6 | 37.7 | 3.2 |
| Sri Lanka | 327 | 337 | 2.8 |
| Sudan | 590 | 605 | 2.6 |
| Venezuela | 24.5 | 24.7 | 0.9 |
| South Sudan | 851 | 850 | -0.2 |
Action Plan:
- Understand the economic impact of parallel currency markets.
- Stay informed about rate disparities in countries with active parallel markets.
- Consult local sources and compare rates for the best value in remittances.