INFLOWS

Kenyans abroad send less money home in July

Remittances fell Sh11.6m short of June inflows

In Summary

•During the month, drops were noted on inflows from North America and the rest of the World. Kenyans in Europe however sent home more.

•Nevertheless, Kenyans have sent more cash this year so far (seven months to July) compared to last year in support of families and friends during Covid-19 pandemic.

The US Dollar notes/FILE
The US Dollar notes/FILE

Kenyans living abroad sent home $276.9 million (Sh30.03 billion) in July, a drop from $288.5 million (about Sh31.28 billion) sent in June, reflecting uncertainty in the global economic outlook in wake of Covid-19.

The drop is mainly recorded on inflows from North America and the rest of the World, the latest Central Bank of Kenya data shows, save for Kenyans in Europe who increased their share.

During the month, inflows from North America dropped to $144.2 million (Sh15.6 billion) compared to $147.3 million (Sh15.9 billion) sent in June.

Remittances from Europe however surged 10.6 per cent to $47.8 million (Sh5.2 billion) from June’s $43.8 million (Sh4.7 billion).

Those from the rest of the world totaled $85.04 million (about Sh9.2 billion, a 13 per cent drop from $97.4 million (Sh10.6 billion) sent in June.

This means in total, Kenyans sent home Sh11.6 million less in July compared to June.

Remittances had picked in June from May when Kenyans had sent home a total $258.2 million (about Sh27.9 billion).

Nevertheless, Kenyans have sent more cash this year so far (seven months to July) compared to last year, as the diaspora community moves to cushion families, relatives, and friends back home.

This, as the economy continues to feel the brunt of the pandemic, which has hit more than 5.9 million jobs since the first Covid-19 case was reported in the country in March.

The total inflows for the seven months to July totaled $1.738 billion (Sh188.5 billion),a 3.9 per cent increase compared to same period last year, where inflows totaled $1.674 billion (Sh181.5 billion).

In July last year, Kenyans abroad sent home Sh24.3 billion, about Sh6 billion less than what has come in the same month this year.

Kenyans in the US remain the leading batch in sending money home, with remittances playing a key role in cushioning the economy, mainly helping narrow the country’s current account deficit currently at 4.7 per cent of GDP (12 months to July 2020), compared to 5.0 per cent in the 12 months to June.

“The fact that the inflows continued unabated, and infact expanding on a 12 month cumulative comparison, suggests the resilience of the diaspora skillset,” Financial Risk Analyst Mihr Thakar said yesterday. 

He has however noted a possible "consumer trap" locally, whereby recipients of diaspora inflows are quick to spend the money, while the diaspora community continues to transfer money during lockdowns abroad, meaning that they do have a savings culture (resorting to an emergency fund). 

“Where there was a period of lockdown in a country and the inflows continued relatively unabated, there is an indication of high dependency back home, albeit inconclusive,” Thakar added.

During the Monetary Policy Committee (MPC) meeting on July 29, 2020, CBK governor Patrick Njoroge noted expectation of increased economic activity in the next two months particularly with the recent easing of movement restrictions.

Other factors are the impact of the fiscal and monetary policy measures to cushion the economy from the effects of the pandemic, favourable weather conditions, continued payment of pending bills by the Government, and “strong diaspora remittances.”

Nevertheless, uncertainties with regard to the increasing rate of Covid-19 infections were noted.

“ The global economic outlook for 2020 remains highly uncertain, reflecting the unpredictability of the severity and persistence of the Covid-19 pandemic,” Njoroge said.

After a sharp contraction in the first half of 2020, global economic activity is however expected to recover gradually in the second half, mainly reflecting the impact of the lifting of Covid-19 containment measures and the effects of the fiscal and monetary policy measures put in place.

Nevertheless, risks to the recovery of the global economy remain elevated, particularly with the recent resurgence of Covid-19 infections in countries that had commenced re-opening.

“Although volatility in the global financial markets has moderated, risks of further instability remain,” Njoroge said.

Last year, cash sent from abroad totaled Sh280 billion.