Kenya’s foreign exchange reserve has been under pressure for the better part of the past 12 months driven primarily by rising external debt service costs.
The CBK data has shown an improvement, though not comfortable of the foreign reserve that stood at USD 7.481B (Ksh.1.058T) as of July 13, 2023, equivalent to cover 4.9 months of import cover.
Kenya primarily gets its foreign exchange first from the exports of goods and services, mainly agricultural produce, mining, tourism and diverse services.
Second the county earns from the direct foreign investments, majorly relying improvement of policies and infrastructure to attract FDI and lastly from the diaspora remittances.
Though with weak policies supporting the diaspora remittances to investing back home, the remittances have continued to show resilience with recorded improvements amid the global recession triggered by the Covid 19 scourge and the continuing war in Russia and Ukraine.
Diaspora remittances have recorded faster and thicker growth to overtake earning from tea which has traditionally been the highest Kenya foreign exchange earner and Kenya being the third highest exporter of the commodity in the world.
From the Central Bank of Kenya’s (CBK) monthly surveys, the diaspora remittances have been vibrant over the years contributing to a great extent to Kenya’s foreign exchange and ultimately towards economic growth and development.
|Annual Diaspora Remittances for 5 year period (USD, ‘000,000)|
Remittances for the month of July 2023 reached all time high of 378, 053.01 USD thousand according to the CBK data, up from 345,862.82 recorded for the month of June, 2023. Comparatively, Kenya received a total of 319,404.29 USD thousand in July 2022 showing a huge growth anticipated by the closure of the calendar year for 2023 remittances.
The transfers are from the estimated 3 million diaspora citizens living and working in different regions of the world outside Kenya. It is important to note that remittances from North America contributes to over 55% of total remittances while European nations have about 20% and the rest of the diaspora shares about 25% on average.
The remittances mostly have a positive impact in meeting SDGs.
First, the cash is sent to support education in payment of tuition fees, books and educational materials purchases supporting SDG 4 of ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all.
Secondly the cash go towards supporting medical and health for the families back home anchoring SDG 3 to ensure healthy lives and promotion of well-being for all at all age.
Importantly the cash goes towards supporting the SDG 1 and 2 and supporting SDG 1and 2 as the cash goes to eliminate extreme poverty by provision of basic household amenities back home and purchase of food and food items.
According to Mr. Godfrey Mucheke, the CEO of Ramugo Projects Management, the diaspora citizenry mostly will invest their savings in real estate and other diverse investments like bonds, shares, fixed deposits and in agriculture.
Mr. Mucheke, who has been previously managing diaspora remittances for the Equity Bank for over 10 years notes that the citizens living abroad have a huge propensity to invest in Kenya especially in real estate but lacks protective policies coupled with low trust, thus limiting the investment.
Just as keen as the country has been in supporting other foreign exchange-earning goods and services, strong, deliberate and reliable supportive policies to the 3 million Kenyans living abroad need to be developed and revised.
This should explicitly be targeted in supporting the black tax and in giving impetus to the Kenyans living broad to invest back home and end the continued conferences of rhetoric and theatrics support.
The diaspora population needs to be highly appreciated for their efforts in not only helping improve Kenya’s Human Development Index but also in relieving the current pressure on the foreign exchange.