Economy

Germany beats Saudi as fast-growing dollars source

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Kenya Diaspora Alliance Global chairperson Shem Ochuodho. FILE PHOTO | NMG

Kenyans in Germany have overtaken Saudi Arabia to become the fastest-growing source of dollar inflows among the top five global markets for remittances, the latest official data shows, on easing inflation pressures.

Citizens working in Europe’s largest economy wired home $148.19 million (Sh 22.71billion) in the first 10 months of the year, nearly half more than $101.76 million (Sh15.59 billion) last year, according to data tracked by the Central Bank of Kenya.

The 45.63 percent jump was the highest among the five leading sources of remittances—the US, Saudi Arabia, the UK, Germany, and Australia—which control about 80 percent share of the diaspora inflows.

Read: Diaspora inflows grow slowest in 13 years

Remittances from Saudi Arabia grew 25.40 percent in the review period to $305.93million(Sh 46.88billion), making it the second largest source after the US, which accounted for 55.7 percent, or $1.93 billion (Sh295.80 billion) of total remittances despite falling a marginal 0.75 percent. Cash sent by Kenyans in the UK grew 4.01 percent to $278.94 million(Sh 42.75 billion) and is the third-biggest source.

Germany remains the fourth largest source by amount sent, despite being the fastest growing, ahead of Australia’s $86.62 million(Sh 13.27 billion)—a 4.30 percent drop compared with a similar period last year.

Diaspora remittances have since 2015 remained the largest source of foreign cash flows into Kenya ahead of tourists, foreign direct investments (FDIs), and leading agricultural exports such as horticulture and tea.

Kenyans living abroad last year, for example, wired $4.03 billion (about Sh484 billion where $1 was equivalent to Sh120) back home compared with Sh268. 09 billion receipts from tourists, Sh163.12 billion earnings from tea exports, and an estimated $759 million (about Sh111.93 billion) foreign direct investments.

The largest share of the remittances goes into supporting families at home to buy food and household goods as well as pay medical bills and school fees, according to the CBK-commissioned Kenya Diaspora Remittances Survey Report of December 2021.

Shem Ochuodho, global chairperson 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.

“We are focusing on creating awareness on investment opportunities in key sectors both at the national level and the counties,” said Dr Ochuodho ahead of this year’s three-day Kenya Diaspora Homecoming Convention in Nairobi from Wednesday.

“But as we have always said, ‘if you want milk from a cow, you first fatten it’. 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.”

The climb in dollar flows from Germany has come when inflation in that country, the world’s third-largest economy, has eased to mid-2021 levels, after hitting fresh record levels of 10 percent in September 2022.

German inflation slowed to 2.3 percent in November on falling energy costs, a relief to households.

Soaring energy prices on supply disruptions that followed Russia’s invasion of Ukraine in February 2022 had pushed up living costs in the US and Europe, eating into disposable income that Kenyans in those countries tap to help families and dependents back home.

That had left Saudi Arabia, a key destination for Kenya’s unskilled and semi-skilled labourers, largely domestic workers, as the biggest driver of the remittances into Kenya.

Remittances from oil-rich Saudi Arabia, the Middle East’s largest economy, which suffered a relatively mild rise in inflation, had surged 70.58 percent year-on-year in the review, last year.

Read: Diaspora remittances drop by Sh1.5 billion on US slowdown

President William Ruto has made Germany a top hunting ground for jobs due to the growing unemployed skilled and semi-skilled Kenyan youth, lobbying the giant European economy to ease immigration rules during the State visit of Chancellor Olaf Scholz on May 5.

“I was in Saudi Arabia; the German chancellor was in Kenya a few months ago, and tonight [November 19], I am flying to Germany because he promised employment opportunities for 200,000 Kenyans, and I have to go organise for that,” he said last month.

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