Kenya has witnessed a remarkable surge in diaspora remittances from African countries, with a growth rate of 42 percent in the last seven months.
This surge comes at a time when Kenyans are increasingly seeking job opportunities abroad, particularly within the continent. It is worth noting that this growth rate is the highest among all continents, despite the challenges faced by North America and Europe, which are dealing with high inflation rates averaging eight percent in the US and 7.9 percent in the UK.
The primary driving force behind Kenyans’ decision to seek employment and education opportunities abroad is the desire for greener pastures. Countries such as Uganda and Zambia have emerged as promising destinations offering better prospects for Kenyans.
Inflows from Zambia have more than doubled, experiencing a staggering growth rate of 136 percent, reaching $5 million. Uganda is not far behind, with a growth rate of 113.5 percent in cash remittances sent back home by Kenyans.
While inflation in the US has eased to 3.2 percent in July, it is important to highlight that the cumulative seven-month inflows from the world’s largest economy still decreased by 1.6 percent, amounting to $22 million, and standing at $1.36 billion.
Despite this decline, remittances remain the largest source of foreign exchange inflows into Kenya. Last year, these remittances amounted to $4.3 billion (equivalent to Ksh483 billion), surpassing earnings from other crucial sectors such as tourism ($1.85 billion or Ksh268 billion), tea ($1.13 billion or Ksh163 billion), and horticulture ($1.1 billion or Ksh152.2 billion).
The increase in global inflation caused by geopolitical tensions has prompted the United States to raise its interest rates. As a result, there has been a shift towards contractionary global monetary policies, with investors showing a preference for government securities as investment assets. This change in investment patterns has led to a reduction in inflows into Kenya.
In addition to Kenya, other countries have also experienced a decline in inflows. Qatar, for example, saw a significant decrease of 38.4 percent, amounting to $31.9 million. Similarly, Oman’s inflows declined by 68 percent to $1.1 million.
Another country affected by this trend is South Africa, which experienced a substantial drop in inflows from $13.5 million in the January-July period last year to $6.3 million this year.
These developments highlight the impact that global inflation and geopolitical tensions can have on international financial flows and investment decisions.