Central Bank of Kenya head office in Nairobi. [Jonah Onyango, Standard]
Coronavirus caught the world flatfooted, but nothing has pulled a surprise on economic experts more than the hike in diaspora remittances to poor nations during the pandemic.
The World Bank had even projected that remittance flows to low- and middle-income countries were expected to drop by around 20 per cent.
Nine months later, official figures tell a different story – a story of how Africans give, not just out of ability, but out of need and resilience.
In Kenya, what has kept the economy breathing during the pandemic has been agriculture and diaspora remittances.
The two offered the nation a lifeline when erstwhile prime sectors such as tourism were knocked out by the virus.
Last year alone, Kenyans sent home more than Sh337 billion, according to Central Bank of Kenya (CBK) data. This was a significant increase from the Sh305 billion recorded in 2019.
The month of December last year saw the highest remittance from the diaspora of Sh32.5 billion, largely attributed to supporting festivities and preparations for re-opening of schools.
“This remarkable growth of remittances has been supported by financial innovations that provided Kenyans in the diaspora more convenient channels for their transactions,” read a statement from CBK yesterday.
It is only in April and May 2020 that remittances dipped. But since then, they have staged a remarkable recovery as diaspora Kenyans kept the giving spirit alive.
Nigeria remains the largest recipient of remittances in sub-Saharan Africa and is the sixth-largest beneficiary among low- to middle-income countries, with an estimated $23.8 billion (Sh2.5 trillion) received in 2019.
This was an increase of more than half a billion dollars compared to 2018.
Ghana and Kenya were ranked a distant second and third in the region, with $3.5 billion (Sh374 billion) and $2.8 billion (Sh299 billion) received up to September 2019.
The release of the official figures comes after CBK mooted a plan to introduce a Diaspora Remittances Survey in partnership with Kenya National Bureau of Statistics, the Ministry of Foreign Affairs and other stakeholders.
The survey, which will be conducted in February and March, aims at collecting valuable information on remittance inflows to Kenya, the efficiency and cost of alternative remittance channels.
It will also help in informing Kenyans in the diaspora on the investment opportunities in the country and the usage of remittances received.
Despite the increased foreign remittance, the shilling has continued to weaken under the blows of Covid-19.
The country’s foreign exchange reserves (forex) rose by $3.4 million (Sh377.4 million) in the first two weeks of December but this was not enough to shield the shilling, which exchanged at average 110.6 to the dollar.
The weak currency has raised the cost of Kenya’s external loans, a big chunk of which is denominated in dollars.
Last month, Treasury Cabinet Secretary Ukur Yatani said there was need for the country to hedge against exchange rate risks to mitigate the high cost of servicing dollar-denominated debts.
“To mitigate against currency fluctuations, the currency mix is usually preferred,” Yatani told the National Assembly Finance Committee.
Close to 66 per cent of Kenya’s external loans are denominated in dollars.
“We need to have a strategy in our medium-term debt plan, that we have alternatives, and we are aggressively pursuing euro-denominated loans,” Yatani said.
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