- Remittance inflows amounted to $385.9 million in February, compared to $309.2 million in February 2023, an increase of 24.8 per cent.
- The cumulative inflows for the 12 months to February 2024 totaled $4.33 billion compared to $4.03 billion in a similar period in 2023, an increase of 7.5 per cent.
- The US remained the largest source of remittances to Kenya, accounting for 54 per cent in February 2024.
Remittances to Kenya continued on a growth trajectory in February, latest Central Bank of Kenya (CBK) data shows, as easing inflation in the United States saw the country maintain its position as the leading source of inflows.
This comes amid a positive projection for the year where World Bank has forecast a 2.5 per cent increase on inflows to Sub-Saharan Africa, with Nigeria, Ghana and Kenya as leading recipients in the continent.
Remittance inflows in Kenya amounted to $385.9 million in February, compared to $309.2 million in February 2023, an increase of 24.8 per cent.
The cumulative inflows for the 12 months to February 2024 totaled $4.33 billion compared to $4.03 billion in a similar period in 2023, an increase of 7.5 per cent.
“The US remained the largest source of remittances to Kenya, accounting for 54 per cent in February 2024,” the Central Bank of Kenya said in its latest update.
The growth mirrors the softer than last year inflation rate in the US, at 3.15 per cent in February compared to 3.09 per cent the previous month, and 6.04 per cent last year and lower than the long-term average of 3.28 per cent.
This, as the Federal Reserve remains in a balancing act of managing the interest rates to tame rises in inflation without tipping the economy into a recession, where higher interest rates lead to an increase in borrowing costs for companies and households, impacting economic growth.
According to rating firm, S&P Global, the numbers from the US are “encouraging” going by the latest data.
“Although the S&P Global PMI index of average prices charged for goods and services rose slightly according to February’s provisional ‘flash’ reading, indicating a marginally faster rate of increase, the index remained low by historical standards. In fact, after January, February’s reading was the lowest since June 2020,” the company noted.
The number of Kenyans in the diaspora has significantly increased and is estimated to be four million, according to the Ministry of Labour, with the US leading followed by the UK and countries in the Middle East such as Saudi Arabia, and UAE.
Read also: Diaspora remittances to Kenya up 18% to $412M in January
How remittances to Kenya are used
Diaspora remittances are currently the biggest foreign exchange earner for East Africa’s largest economy having overtaken earning from tea, coffee and tourism.
These inflows remain critical in supporting the country’s foreign exchange reserves which as of last Friday, March 15th, stood at $6.9 billion or 3.7 months of import cover.
“This meets the CBK’s statutory requirement to endeavor to maintain at least four months of import cover,” CBK said, as it termed the reserves “adequate.”
The inflows have also played a major role in cushioning the shilling against the US dollar, amid continued high demand for the greenback by importers, where the country remains a net importer.
The Kenya Shilling remained stable against major international and regional currencies during the week ending March 14, exchanging at an average 137.49 units to the US dollar last week, compared to 142.07 per US dollar in the previous week.
In households, the inflows continue to have a major impact with education, healthcare and household needs as the main uses, an analysis by global payment firm, World Remit, indicates.
The high cost of education and healthcare is expected to further push the cost of living for most families in Kenya and other sub-Saharan countries, with those with families and friends abroad seen to count on them to help meet the needs.
“Migrants’ resilience and commitment to their loved ones back home has proven to be vital especially in a period where household expenses are increasing around the world,” World Remit noted.
Remittances are proving to be resilient overall, the firm noted, with migrants willing to make lifestyle adjustments to maintain the regular flow of remittances.
Families in Morocco, Cameroon, Ghana, Guatemala and Kenya are all projected to spend more than the average monthly income on education.
“During crises, migrants have weathered risks and shown resilience to support families back home. But high inflation and subdued global growth is affecting how much money they can send,” said Iffath Sharif, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
“Labor markets and social protection policies in host countries should be inclusive of migrants, whose remittances serve as a vital lifeline for developing countries,” Sharif added.
Read also: Impact of Covid-19 on diaspora remittances
2024 remittances outlook
In 2024, remittance flows to the Sub-Saran region are projected to increase by 2.5 per cent. This is despite concerns over a possible decline in real income for migrants in the face of global inflation and low growth prospects, according to the latest World Bank’s Migration Development brief. The high cost of sending money also remains a hindrance to the growth of remittances.
According to the World Bank’s Remittances Prices Worldwide Database, remittance costs remain persistently high, costing 6.2 per cent on average to send $200 as of the second quarter of 2023.
Compared to the previous year, sending money to all regions was more expensive, with the Middle East and North Africa being the exception. Banks continue to be the costliest channel for sending remittances (with an average cost of 12.1 per cent), followed by post offices (7 per cent), money transfer operators (5.3 per cent), and mobile operators (4.1 per cent).
“Remittances are one of the few sources of private external finance that are expected to continue to grow in the coming decade. They must be leveraged for private capital mobilisation to support development finance, especially via diaspora bonds,” said Dilip Ratha, lead economist and lead author of the report.
According to Ratha, remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years, and the gap is increasing.
Remittance flows to Sub-Saharan Africa are expected to have increased by about 1.9 per cent in 2023 to $54 billion, driven by strong remittance growth in Mozambique (48.5 per cent), Rwanda (16.8 per cent), and Ethiopia (16 per cent).
Remittances to Nigeria, accounting for 38 per cent of remittance flows to the region, grew by about two per cent, while two other major recipients, Ghana and Kenya, posted estimated gains of 5.6 per cent and 3.8 per cent, respectively.
Fixed exchange rates and capital controls are diverting remittances to the region from official to unofficial channels.
Read also: East African Cities Slated for Strong Economic Growth by 2050
