Cash from Kenyans abroad fell for the third straight month in April, underlining the continued contraction of key foreign exchange inflows.
The Central Bank of Kenya (CBK) data shows the remittances fell by 9.8 percent to Sh44.1 billion ($320.3 million) from Sh48.8 billion ($355.04 million) in April 2021.
April’s decline of money from Kenyans living and working abroad is the sharpest in the year to date after marginal declines in February and March at 3.8 and 1.8 percent, respectively.
Cumulatively, the remittances have in the year to date declined by 3.1 percent to Sh183.76 billion ($1.336 billion) from Sh189.68 billion ($1.379 billion) at the same stage last year.
Despite the drop, CBK says the inflows remain supportive of the external balance of payments and foreign exchange.
“The remittance inflows continue to support the current account and the foreign exchange market,” said CBK bulletin last week.
Money from Kenyans abroad had registered its first quarter drop since March 2010 as inflation took aim at the disposable income of the country’s diaspora.
Remittances in the quarter to March had dropped to Sh139.76 billion ($1.016 billion) from Sh140.86 billion ($1.024 billion) in March 2022.
The rising cost of living in countries like the US and Europe in the backdrop of higher energy, food and rent prices has squeezed households’ disposable income affecting the values of funds remitted back home by Kenyans living and working abroad.
For minorities, the impact of inflation has hit much closer home given a larger proportion of incomes is directed towards costly essentials including food, transportation and housing.
“This signals that the cost of living in the source countries is putting pressure on remittances. Individuals for instance might be forced to put aside more income to meet rising expenses, reducing the pool of funds available to be sent back home as remittances,” Genghis Capital research analyst Ronny Chokaa told the Business Daily in an earlier interview.
Additional data from the CBK which categorizes remittances by source country shows the inflows from the US, India and Qatar dropped in January and February.
Despite signs of easing inflation in advanced economies, diaspora remittances could still come under pressure from the widely expected global economic slowdown with a number of economists and analysts already pricing in a recession in the next 24 months.
The recession fears have been driven by recent monetary policy tightening by Central Banks in the advanced economies with the higher interest rates desired to correct runaway inflation by effectively cutting the demand for goods and services.
Diaspora remittances have been a key source of foreign exchange into the country while some households have greatly depended on the inflows as cash support in the tough-going macroeconomic environment domestically.
Since 2015, diaspora remittances have been the second largest source of foreign exchange into Kenya after foreign direct investments as other leading sources of hard currency such as tea and horticulture exports trail money from Kenyans abroad.