As reported by BisnisDaily, the dominance of the Big Five countries in remittances to Kenya is a concern because it means the country’s economy is heavily dependent on a small group of nations. If one of these countries has an economic problem, it will affect the amount of money flowing into Kenya. This may lead to a shortage of foreign currency, which may lead to difficulties in paying imports and debts.
According to data from the Central Bank of Kenya, these five countries sent a total of $4.7 billion to Kenya last year. In addition, the amount of remittances sent to Kenya from the five countries is growing at a slower pace than before. This is partly due to high inflation in some of these countries, especially the United States.
The United States is the most important of the five countries for the Kenyan economy. 58% of money sent to Kenya comes from the US. While inflation was high in the US last year, the cost of living was more expensive. This led to several changes in the US economy that affected the value of the Kenyan currency.
Another important insight from the report shows that the amount of money sent to Kenya from abroad is still higher than the money from exporting crops like tea and coffee. Combined receipts from tea, horticulture, and coffee are 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 sources of diaspora inflows to reduce the risk of concentration in a few countries, ensuring a more stable and steady flow of foreign exchange to Kenya.