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Remittance and Kenya’s Economy

05 Oct

Kenya is regional hub for trade in East Africa. The country has a market-based economy with a liberalized foreign trade policy. Over reliance on agricultural production and tourism makes the economy vulnerable to international market highs and lows.Kenya is an East African nation with a prominent coastal line along the Indian Ocean. The country shares its borders with Ethiopia, Somalia, Tanzania, Uganda and Sudan.It is the 47th largest country in the world in terms of land area. Kenya has coastal plains at the eastern end, which rise to central highlands towards the west.Kenya’s economy suffers from a high population growth rate and rampant corruption which is the biggest impediment to Kenya’s economic growth. Following the 2005-06 foreign aid frauds, international agencies delayed fund advancements. The post-election violence in 2008 worsened the economic conditions thus the economic growth remained volatile.

Diaspora remittances have however grown steadily over the last five years, providing a lifeline for thousands of Kenyans with relatives working abroad, while also adding fuel to the stock market and real estate.Kenyans in the diaspora are able to borrow at lower rates in the countries they reside in for investing locally to earn higher return.sRemittances from Kenyans working abroad rose 15 per cent to $52 million (Sh4.1 billion) in June compared to the same month last year, boosting the shilling and domestic demand in an economy that is witnessing sluggish retail numbers.The bulk of the money sent goes into household expenditure and supporting investments such as shares and real estate.Currency dealers reckon that the increased flow will help support the shilling.World Bank estimates put total remittances that come through the banking system and unofficial channels such as personal deliveries at over one billion dollars per annum.

Remittances are Kenya’s largest source of foreign exchange and  they have played a vital role in alleviating the liquidity constraints that would otherwise prevent the state (or households) from investing in important areas like children’s education and housing construction.

 
 

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  1. Jackie

    October 5, 2010 at 1:58 pm

    Finally something fresh and new that make sense! I would like to see more about this and that is what I’m going to do.