Remittances decline by 9pc signals dwindling dollar in-flows
African countries that rely on commodities and oil exports to earn the dollars they need to pay for imports of food and consumer goods have been hit hard by a decline in global prices. FILE
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CBK data shows that in June 2013, Kenyans working abroad sent $99.81 million (Sh8.75 billion) down from $110.15 (Sh9.66 billion) in the previous month.
North America was the biggest source accounting for 48.2 per cent of remittances followed by Europe, which had a 27 per cent return.
The CBK did not indicate why remittances from the larges market reduced in May but analysts said that a combination of immigration reform and signs of the US economy slow recovery may have led to the decline.
Diaspora remittances mid this year dropped for the first time in 2013 as a result of declining dollars from North America, the biggest source of inflows.
The Central Bank of Kenya (CBK) data shows that in June 2013, Kenyans working abroad sent $99.81 million (Sh8.75 billion) down from $110.15 (Sh9.66 billion) in the previous month, or a 9.4 per cent drop.
“The reduction of remittance inflows was mainly in a $9.53 million (Sh836 million) decline from the North American region,” said the CBK.
Despite a reduction, North America was still the biggest source accounting for 48.2 per cent of remittances followed by Europe, which had a 27 per cent return with other markets accounting for the remaining 24.2 per cent.
The share from North America also reduced between June and May from 52.3 per cent to 48.2 per cent. At $99.81 million, June’s remittances are also the lowest month-on-month this year.
The CBK did not indicate why remittances from the larges market reduced in May but analysts said that a combination of immigration reform and signs of the US economy slow recovery may have led to the decline.
“I have recently seen that the housing market in that region is beginning to rebound and also the recent decision to give citizenship status to illegal immigrants may in some way contribute to this decline since there are more investment opportunities,” said NIC Securities business development manager Samuel Gichohi.
“The former illegals may now legally own investments and hold funds without fear of losing them as was the case before the shift in policy.”
Economists, however, contend that the fall in remittances may be due to Kenyans living abroad finding the going tough and as such they barely have enough for themselves let alone cash to send to their relatives back home.
“Kenyans in the US are suffering from the economic downturn resulting in unemployment and by extension less money to send home,” said X.N Iraki, MBA coordinator at the School of Business, University of Nairobi.
“The recent reports of domestic violence involving Kenyans in the US might be a symptom of the serious economic problems.”
Dr Iraki added that the reduction may also be a result of the peaceful General Election, which may mean that Kenyans abroad deem it not necessary to send additional money.
A reduction in dollar inflows may not augur well for the local currency, which is under pressure due to the increase in government spending and the price of oil, the most important determinants of the shilling exchange rate.
The outlook of tourism, another key source of foreign exchange, is gloomy after the first half of the year saw a 15 per cent drop due to political uncertainty and insecurity.
June figures are, however, slightly higher, by 0.32 per cent, than a year ago when they stood at $99.49 million (Sh8.73 billion).
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