Published On: Mon, Apr 25th, 2016

Diaspora Remittance helped improve East Africa’s Currency Reserves

Kenya’s Diaspora remittance ranked No.1 Foreign Currency earner in 2015 @ $1.14 Billion

East African economies received more than $3.5 billion in diaspora remittances in 2015, with the largest amounts being sent to Kenya and Uganda.

Uganda posted the highest growth at 21 per cent, receiving over $1.1 billion, followed by Kenya with an 8.6 per cent increase, pushing its remittances to $1.54 billion.

Remittances to Uganda went up despite a mid-year prediction by the Bank of Uganda of a $233 million drop due to the tough economic environment the country was facing at the time.

Data from the Central Bank of Kenya shows diaspora remittances rose from the previous year’s

CBK Governor Patrick Njoroge said the inflows, buoyed by a reduced import bill, helped the country improve its reserves.

“Traditional exports have weakened, but remittances remain strong. We have seen an increase in foreign currency reserves to the current $7.5 billion. The oil import bill has also dropped, which has supported our efforts in stabilising the currency,” Dr Njoroge said.

Last year, the Kenya shilling lost 12.8 per cent against the dollar, the Uganda shilling 22.2 per cent, the Tanzania shilling shed 24 per cent and the South African rand 32.2 per cent. Kenya’s relative resilience was partly due to the remittances and falling oil prices.

The Global Knowledge Partnership on Migration and Development ranked Kenya as the third largest receiver of diaspora remittances in Africa in 2015, behind Nigeria and Ghana.

Mercyline Gatebi, an analyst at Genghis Capital, said the remittances provided crucial support to the shilling when traditional sources of foreign currency like coffee, tourism and horticulture were on the decline.

“We have also seen that the impact of opening up mobile transactions across the region has led to an increase in remittance. The collaborative arrangements among telecom operators and money transfer operators in Kenya, Rwanda, Tanzania and Uganda are likely to lower remittance costs and make services more efficient and viable,” Ms Gatebi said.

Analysts at Cytonn Investments say they expect an increase in remittances in the future.

“We expect the shilling to remain stable given support from a strong dollar reserve, an expected reduction in development expenditures, and improved forex inflows from remittances and tea exports,” said a market report by Cytonn.

Co-operative Bank head of diaspora banking Milka Wachira said they had handled about 20 per cent of the total national remittances.

In 2015, the National Bank of Ethiopia reported that remittances rose to $1.5 billion, an 88 per cent jump from 2014.

The depreciation of the Uganda shilling last year was blamed on the low remittances figures in the first half of the year. It is estimated that more than 1.2 million Ugandans are living and working in the diaspora, with Bank of Uganda statistics showing remittances of $885.9 million in 2014, lower than the $931.6 million earned in 2013. The 2015 figures however showed an improvement.

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Diaspora Remittance helped improve East Africa’s Currency Reserves
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