Kenya faces sharp drop in diaspora remittances
Seth Onyango @SethManex
The depressed global economy has seen Kenya record a sharp decline in cash inflow from the diaspora as the crippling coronavirus pandemic disrupts earnings of the migrant workforce abroad.
This signals tougher times ahead for thousands of households that are hooked to the diaspora cash pipeline that run into hundreds of billions of shillings, for survival.
According to Central Bank of Kenya (CBK) Kenyans working and living abroad sent home $2.7 billion (Sh279 billion) in 2019.
However, many of them are now losing jobs due to various lockdowns imposed globally to contain the respiratory flu.
In America alone, the number of people forced out of work during the coronavirus lockdown soared to historic highs with 26 million jobs lost in just five weeks.
Records show of the 120,000 Kenyans in America, 35 per cent (42,000) don’t have legal resident status thus leaving them vulnerable to the economic shocks of the virus.
With the bulk of diaspora remittances coming from the United States, it is expected that foreign inflow from the world’s superpower will dip significantly.
The World Economic Forum has projected this year’s diaspora remittances to shrink by over 20 per cent on the back of Covid-19 contagion that is ravaging economies.
CBK says $2.7 billion (Sh279 billion) sent in 2019 represented a 3.7 per cent growth compared to 2018, but still fell short of the World Bank’s prediction of Sh285.5 billion.
North America, Europe and the rest of the countries accounted for 50 per cent, 20 per cent and 30 per cent respectively, of the total remittances in December last year.
World Bank now warns that remittances to low- and middle-income countries will fall by nearly 20 per cent to $445 billion, “representing the loss of a crucial financial lifeline for many vulnerable households”.
Kenya, where diaspora remittances account for the largest share of foreign inflows, is expected to feel even more pain and Investment Analyst at Cytonn Investment Felix Otieno said that apart from households, the next casualty will be the shilling which is expected to depreciate in the coming months.
“We all know that the Kenyan shilling is mostly supported by diaspora remittances and when this is suppressed, we expect to see the shilling weaken against the US dollar…we also expect our debt to be more expensive,” he said.
Those who will suffer most are Kenyans who depend on philanthropic remittances for their livelihoods ― including some poor households, charities and some non-governmental organisations.
Globally, diaspora remittances shelter a large number of poor and vulnerable households, underpinning the survival strategies of over 1 billion people.