Kenya's economy on shaky ground with majority of diaspora inflows coming from just 5 countries

Kenyans living abroad and their well-wishers from five countries: the US, the UK, Saudi Arabia, Germany and Australia, sent a combined Sh377.7 billion last year.
This concentration of sources poses a risk to the economy in the event of economic shocks in those countries, CBK warns.
Remittances are a significant source of foreign exchange for Kenya and play a key role in providing hard currency for imports and debt service.

Kenya's economy is at risk because a lot of the money that comes into the country from abroad is sent by people in just five countries: the United States, the United Kingdom, Saudi Arabia, Germany, and Australia. These five countries make up 80% of the money sent to Kenya by people living abroad or by their friends and family.

As reported by BusinessDaily, the dominance of the Big Five countries in remittances to Kenya is a concern because it means that the country's economy is heavily dependent on a small group of nations. If any of these countries were to experience economic troubles, it would significantly impact the amount of money coming into Kenya. This could lead to a shortage of foreign currency, which could, in turn, lead to difficulties in paying for imports and servicing debt.

According to data from the Central Bank of Kenya, these five countries sent a total of $4.7 billion to Kenya last year. Additionally, the amount of money sent to Kenya from these five countries grew at a slower rate than it had in the past. This was partly because of high inflation in some of those countries, especially the United States.

The United States is the most important of these five countries for Kenya's economy. 58% of the money sent to Kenya comes from the US. When inflation was high in the US last year, it made the cost of living more expensive. This led to some changes in the US economy that affected the value of the Kenyan currency.

Another important insight from the report showed that the amount of money sent to Kenya from abroad was still much higher than money from exporting crops like tea and coffee. The combined receipts from tea, horticulture, and coffee were only 1.4 times lower than diaspora inflows, and exports from these cash crops stood at Sh296.7 billion in the 11 months to November.

This report highlights the importance of diversifying the sources of diaspora inflows to reduce the risk of concentration in a few countries, ensuring a more stable and robust flow of foreign exchange to Kenya.