July diaspora inflows from the US shrink as inflation bites
Kenyans living and working in the US wired home $186.5 million (Kes22.4 billion) to their dependents in July, a 10.8 percent drop compared to $209.1 million (Kes25 billion) received in a corresponding month last year as the rising cost of living erodes incomes globally.
Money send from friends and relatives in the diaspora remains a crucial source of foreign exchange for the country and a reliable support for many households.
A recent Central Bank survey revealed that the remittances are usually directed at family members, who are largely self-employed, unemployed, or students but mothers account for the lion share of monies received accounting for about 20 percent of the inflows. Last year, remittances closed at US$3.71 billion or Kes421.98 billion.
However, the depreciating shilling has made up for the shortfall in remitted funds from the US, allowing recipients to earn more shillings when selling dollars at the bureau de change.
For context, the $186.5 million from July 2022 equals Kes22.2 billion (1 USD current exhange rate of Kes119), while the $209.1 million from July 2021 translates to 22.9 billion when the greenback was exchanging at Kes109.
Diaspora statistics from Central Bank of Kenya (CBK) shows total monies sent to Kenya from North America, Europe and the rest of the world last month amounted to $319.4 million (Kes38.3 billion) relative to $336.7 million (Kes 37 billion) wired in July 2021.
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Experts have attributed the drop in American remittances to the amplified cost of living that has rocked the world’s biggest economy this year thereby impairing expendable income for Kenyans in the US to support their kin back home.
The Biden administration has been struggling to tame inflation which soared past 9 percent by the end of June, a 40-year high.
The rate of change in prices for the goods and services in the United States has since abated to 8.5 percent by end of July.
The runaway inflation in the US can be traced back to the government’s stimulus spending during the peak of the pandemic in 2020, although it has been exacerbated by Russia’s invasion of Ukraine which has triggered commodity prices such as oil and food rising.
America is Kenya’s top source of diaspora remittances comprising nearly 60% of all funds sent into the country this year.
Other major sources of remittances to Kenya such as the United Kingdom, Canada and Australia posted significant inflows. Money sent from the UK totaled Kes3.2 billion in June while Australia and Canada accounted for Kes1.19 billion and Kes1.04 billion, respectively.
