Kenya sees diaspora remittance inflows slow by most in 13 years
Diaspora inflows in Kenya for the first nine months of this year have shown the slowest growth rate in the past 13 years, increasing the pressure on the country's supply of foreign currency. Data from the Central Bank of Kenya (CBK) reveals that remittances from abroad grew by only four percent during the nine months leading up to September. This marks the slowest growth since 2010 when inflows increased by just two percent.
During this period, Kenyans living abroad sent a total of $3.1 billion, compared to $2.9 billion sent over a similar period the previous year. The sluggish rise in remittances has been attributed to ongoing inflationary pressures, prompting central banks worldwide to raise their benchmark interest rates and limit cash flow.
The CBK mentioned in a recent monetary policy committee meeting that the growth outlook in Kenya remains weak, influenced by the effects of monetary policy tightening in advanced economies. Notably, North America, which typically contributes around 60% of the total inflows to Kenya, experienced a drop of $13.9 million during the specified period.
Remittances, which are primarily used for consumption, continue to be the largest source of foreign exchange inflows to Kenya, amounting to $4.3 billion in the previous year. This surpasses earnings from other sectors such as tourism, tea, and horticulture. The slow growth in diaspora inflows is a concern, particularly as the country is grappling with foreign exchange issues, with the local currency losing nearly a fifth of its value since the beginning of the year. The modest 2% growth observed in the first quarter of 2010 was a result of the spillover effect of the global financial crisis that affected advanced economies in the latter part of the previous decade. Before that, remittances had declined by three percent in 2009 but rebounded in 2010. Various global developments, including geopolitical tensions and conflicts, as well as the slowdown of the Chinese and Eurozone economies, have had a significant impact on global consumption patterns and, by extension, remittance growth.