Diaspora inflows into Kenya have experienced their slowest growth rate in the past 13 years, increasing by just four percent in the first nine months of the year, according to data from the Central Bank of Kenya (CBK). This deceleration in remittances exacerbates the pressure on the country’s supply of dollars, especially as the local currency has depreciated by nearly a fifth since January.
Key Points:
- Slowest Growth Since 2010: The four percent growth in diaspora inflows from January to September marks the slowest pace since 2010, when inflows expanded by two percent. This period coincided with the global financial crisis, which had a spillover effect on advanced economies.
- Persistent Inflationary Pressures: The sluggish rise in remittances is attributed to ongoing inflationary pressures, prompting central banks worldwide to tighten their monetary policies. This has limited cash flow and influenced the flow of funds sent back home.
- Total Remittances: Kenyans living abroad sent a total of $3.1 billion (Sh403.8 billion) in the nine months up to September, compared to $2.9 billion (Sh329.1 billion) over the same period last year.
- North America’s Contribution: North America, which traditionally contributes around 60 percent of inflows to Kenya, experienced a slight drop of $13.9 million during this period.
- Significance of Remittances: Remittances remain the largest source of forex inflows, totaling $4.3 billion (Sh483 billion) last year. This surpasses earnings from key sectors like tourism (Sh268 billion), tea (Sh163 billion), and horticulture (Sh152.2 billion).
- Global Influences on Consumption: Various global factors, such as geopolitical tensions, conflicts, and economic slowdowns in regions like China and the Eurozone, have had a significant impact on consumption patterns worldwide, affecting the flow of remittances.
Conclusion: The sluggish growth in diaspora inflows raises concerns about the resilience of Kenya’s forex reserves, particularly in the face of persistent inflationary pressures and global economic uncertainties. With remittances being a vital source of foreign exchange, policymakers and central banks will need to monitor these trends closely and implement effective strategies to stabilize the currency and ensure economic stability.
