INFLOWS

Global remittances to reach Sh74.2 trillion in 2022 – World Bank

Survey by global firm World Remit shows health and education remain key uses in Kenya.

In Summary

•The high cost of living and tight school calendar is expected to drive up remittances as those working and living abroad send money home to support family. 

•The country’s inflation hit a two-year high of 7.9 in June, above the government's ceiling by 40 basis points.

A cashier at a Nairobi forex bureau counts dollars and shillings/
A cashier at a Nairobi forex bureau counts dollars and shillings/
Image: FREDRICK OMONDI

Officially recorded remittance flows to low- and middle-income countries are expected to increase by 4.2 percent this year to reach $630 billion (Sh74.2 trillion), the World Bank has projected.

This, as education and health remain the leading uses and purposes of sending money back home by Kenyans living abroad, global payments firm–WorldRemit notes.

The projection is an increase from a previous $565 billion (Sh66.5 trillion) announced in the first quarter of this year.

This follows an almost record recovery of 8.6 percent in 2021, according to the World Bank’s latest migration and development brief, with Kenya being among the biggest recipients in Africa.

Remittances to Ukraine, which is the largest recipient in Europe and Central Asia, are expected to rise by over 20 percent in 2022.

However, remittance flows to many Central Asian countries, for which the main source is Russia, will likely fall dramatically, World Bank notes.

These declines, combined with rising food, fertilizer, and oil prices, are likely to increase risks to food security and exacerbate poverty in many of these countries.

“The Russian invasion of Ukraine has triggered large-scale humanitarian, migration and refugee crises and risks for a global economy that is still dealing with the impact of the Covid pandemic,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.  

According to Rutkowski, boosting social protection programs to protect the most vulnerable is a key priority to protect people from the threats of food insecurity and rising poverty. 

In Kenya, the high cost of living and tight school calendar is expected to drive up remittances as those working and living abroad send money home to support family. 

The country’s inflation hit a two-year high of 7.9 in June, above the government's ceiling by 40 basis points.

This is mainly on a rise in food prices and transport.

A recent survey by global payments firm–WorldRemit indicates education and health remain the leading uses and purposes of sending money back home by Kenyans living abroad, with the US the main market source.

The back-to-school rush, expected in a week’s time, is seen to drive inflows as families and friends living abroad chip in to support those back at home. 

This, as World Remit ranks Kenya among top recipients this year.

The country comes second after Nigeria with money channeled through the global firm amounting to £170 million (Sh24.4 billion) in the first half.

This is a sizable share of total monthly inflows, with Kenyans sending back home Sh39.96 billion in May–Central Bank of Kenya data.

Nigeria received £270 million (Sh38.8 billion ) via World Remit as of June 1.

Other top receivers were Zimbabwe,Ghana, Uganda, Tanzania, South Africa and Somaliland.

Transaction costs however remain high, the World Bank notes, with global average cost of sending $200 at 6.5 percent, more than double the Sustainable Development Goal target of 3 per cent.

Average remittance costs were the lowest in South Asia (4.9 percent), while Sub-Saharan Africa continued to have the highest average cost (8.2 percent).

“Supporting the remittance infrastructure and keeping remittances flowing includes efforts to lower fees,” Word Bank notes in its report.

During the pandemic, WorldRemit for instance lowered prices for international transfers in over 450 of its larger corridors in Africa.

The lowered prices, the firm says, allowed customers to send more to family and friends via the mobile app or website to the various African corridors, where Kenya was a major beneficiary.

It projects monthly inflows to average the Sh40 billion mark, with other markets growing.

“Gulf states such as Saudi Arabia, United Arab Emirates, Qatar, and Bahrain have emerged as important destinations as more Kenyans continue to look for opportunities abroad,” World Remit notes.

The US however remains the largest source of remittances into the country.

Financial Risk Analyst Mihr Thakar said: “The bulk of data out of the US is so far positive, with May unemployment rate coming in at 3.6 per cent.A precipitous decline in remittances can be considered remotely possible, though not probable, in Global Financial Crisis (GFC)-like conditions.”

However, remittances are expected to remain resilient, even if some countries, including the US, enter into a recession, he told the Star.

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