Diaspora inflows hit record Sh17.3b, helps cushion shilling against volatility

NAIROBI, KENYA: Kenyans working abroad sent home a record Sh17.3 billion in August, helping cushion the local currency from new shocks, new Central Bank data shows.

This represented a 13.4 per cent jump from the same period last year, which is nearly three-fold earlier projections by institutions such as the World Bank.

Diaspora inflows in July stood at Sh15.74 billion, the third highest monthly value. This represented a marginal 1.66 per cent decline from Sh16 billion remitted in July.

Remittances by Kenyans in the diaspora, which stood at Sh177 billion by the end of last year, have grown to outgrow other sources of foreign exchange earnings, including tea, coffee, horticulture, and tourism. Although CBK did not give a specific explanation for the sudden rise in the diaspora remittances, most countries abroad have recorded improved economic conditions lately. Consumer confidence in the United States - the main source of inflows - has, for instance, soared to the highest levels since 2000, according to the latest forecast that also points to lower unemployment.

Jittery visitors

“Consumers’ assessment of current conditions improved boosted by the job market, which had not received such favourable ratings since the summer of 2001,” Lynn Franco, director of economic indicators at The Conference Board is quoted as saying.

Back home, however, the economic outlook has been gloomy on the back of a prolonged drought and a deteriorating political environment.

Diaspora remittances are a critical source of foreign currency for Kenya and play a critical role in shielding the shilling against volatility.

The current political stalemate has also affected tourism, another top foreign exchange earner, with most hotels recording massive booking cancellations as jittery visitors opted to stay away, fearing political violence.

The World Bank earlier last month projected a slower growth in remittances, putting the figure at Sh185 billion for the year.

But in the first eight months alone, more than Sh125 billion has been received, an indication that the estimate could be surpassed over the September to December period when traditionally remittances peak. Remittances stood at Sh177 billion at the end of last year.