Cash sent home by Kenyans working in African countries became the fastest-growing source of the nation’s diaspora dollar inflows last year at a time when overall remittances grew by the slowest pace in four years, largely hurt by elevated inflationary pressures on earnings in the US and Britain.
Cash wired home by Kenyans in other countries on the continent climbed by nearly half to $305.21 million (about Sh48.83 billion under prevailing conversion rates) in 2023 compared with the year before, official data shows, helping boost dollar flows whose supply has been problematic.
The 48.55 percent, or $99.75 million (Sh15.96 billion), jump over $205.46 million (Sh32.87 billion) was largely boosted by a surge in remittances from emerging sources such as Uganda and small sources on the continent classified as “others”, according to the Central Bank of Kenya’s data.
The pace of growth of remittances from Africa placed the continent as one of the biggest drivers of the money sent home by Kenyans abroad.
This came in a period when diaspora remittance, the largest source of foreign exchange ahead of tea exports and tourist receipts, grew 4.02 percent, the slowest pace since 2019.
Total diaspora remittances amounted to $4.19 billion (Sh670.4 billion) in 2023 compared with $4.03 billion (Sh644.8) the year before, according to the Central Bank of Kenya data.
The softening growth in the remittances is largely on account of flattening or reduced flows from Kenyans in America, who account for nearly 60 percent of the total inflows.
The US, despite controlling 55.86 percent of the total remittances, posted a marginal 0.26 percent rise to $2.34 billion (Sh374.4 billion). The US, the world’s largest economy, has been battling high pressure on prices of goods and services in the last three years, which pushed up the cost of rent, medical care as well as prices of cars and car insurance.
The inflation has squeezed earnings by workers, reducing the disposable income that Kenyans in that country tap to help families and dependents back in Kenya.
“The US seems to have a fairly strong economy at the moment. The job market is fairly strong and so we expect continued growth of the remittances from the US,” CBK governor Kamau Thugge said on Wednesday.
Dr Thugge projects the inflows to grow at a slightly higher pace of 5.0 percent, largely supported by the US and Saudi Arabia.
Saudi Arabia, which is President William Ruto’s priority destination in his search for job opportunities abroad, last year overtook the UK to become the second largest source of remittances into Kenya.
Kenyans in the Middle East’s economic powerhouse — who largely work as unskilled domestic labourers as well as skilled workers in sectors such as healthcare, ICT, and construction — wired home $369.80 million (Sh59.17 billion) last year. That represented a 22.34 percent jump year-on-year, but the growth was significantly slower than 63.38 percent in 2022.
The remittances from the UK were largely flat, growing 0.32 percent to $334.19 million (Sh53.47 billion), the data shows.
Germany, which Dr Ruto has a top hunting ground for jobs abroad for the growing unemployed skilled and semi-skilled Kenyan youth, bucked the trend in the developed Western economies to post a 35. 71 percent climb to $175.81 million (Sh28.13 billion).
The CBK data shows the share of Africa has nearly doubled in three years from 4.25 percent in 2021 to 8.21 percent last year.
Uganda was the standout performer in Africa, with remittances more than doubling to $57.34 million (Sh9.17 billion) in the 12 months compared with $27.71 million (Sh4.43 billion) a year earlier.
“We want you to be able to send money back home for investments. The second thing is to help us open pathways to enhance our trade in goods and services,” Diaspora Affairs Principal Secretary Roselyn Njogu told the annual Diaspora Homecoming Convention in Nairobi last December.
“We look at diaspora as a two-way valve: you allow our goods and services to go out because you are already out there and you bring in tourists and investments.”
Shem Ochuodho, the global chairman of Kenya Diaspora Alliance, has maintained that incentives such as tax rebates – usually given to foreign investors – could see the bulk of cash go into direct investments back home.
“ There’s no reason Kenyan diaspora cannot match the kind of investments we have seen in some countries like the Philippines if they are given incentives,” Dr Ochuodho said in an interview last year.