FOREX

September diaspora flows drop as second wave of Covid-19 gathers storm

In May, global lender World Bank warned that global remittances were projected to decline sharply by about 20 per cent this year.

In Summary
  • September remittance dropped by over Sh1 billion compared to Sh29.7 billion in August  
  • France  announced on Thursday a vast extension of the nightly curfew
Central Bank CBK Headquarters
Central Bank CBK Headquarters
Image: /FILE

Kenyans living abroad sent home Sh28.1 billion in September, marking a third monthly drop after a high recorded in June.

Diaspora remittances in June, which stood at Sh31.1, billion ($288.5 million) were the second-highest booked flows in a single month on record, defying the coronavirus wave.

Data from the Central Bank of Kenya (CBK) shows remittance inflows in September stood at $260.7 million compared (Sh28.15 billion) compared to Sh29.7 billion sent in August and Sh29.9 billion in July.

The recent drop is coming at the time some countries especially in Europe are tightening Covid-19 restriction measures, fearing the possibility of the second wave of the virus that has since claimed 1.15 million lives globally.

Most countries had eased restrictions after new infection numbers dropped significantly in July but those numbers are now on rising, with Kenya reporting 1061 cases Thursday last week, the highest daily record since the country reported the first case in March.

France  announced on Thursday a vast extension of the nightly curfew that is intended to curb the spiraling spread of the coronavirus, saying, “the second wave is here.”

While there was a month-to-month drop, last month's inflows were 21.4 per cent high compared to a similar period last year when the country recorded $214.7 million (Sh23.1 billion).

The cumulative inflows in the 12 months to September totaled $2.97 billion (Sh321.8 billion) compared to $2.77 billion (Sh299.1 billion) in the 12 months to September 2019.

The US remains the largest source of remittance flows to Kenya recording a growth of 25.2 percent in the year to September.

However, inflows from South Africa and European countries including Germany and France declined marginally compared to previous months, reflecting knock over effects of the second wave of coronavirus.

In May, global lender World Bank warned that global remittances were projected to decline sharply by about 20 per cent this year due to the economic crisis induced by the virus.

The projected decline was linked to loss of wages as many workers in foreign countries have been laid off or put on unpaid leave, with many source countries imposing total lockdowns.

However, CBK governor Patrick Njoroge said the regulator is expecting the remittance volumes to grow by at least one per cent this year.

Last year, Kenyans abroad sent Sh280 billion which was a 3.7 percent rise compared to Sh269.7 billion dispatched in 2018.

The drop in diaspora remittances, the leading foreign earner for the country is likely to affect the country’s forex reserve, the only currency cushion after the country’s facility from the International Monetary Fund (IMF) expired in 2018.

According to CBK’s weekly bulletin, usable foreign exchange reserves stood at $8.2 billion (4.99 months of import cover) as of October 22 compared to $8.3 billion last week or (5.04 months of import cover).

The drop is likely to further weaken the shilling against the dollar. It closed the week at 108.75 against the greenback compared to 108.61 the previous week.