This archive report was first published on 5 May 2020.
As the COVID-19 pandemic continues to wreak havoc on the global economy, Kenyans working and living abroad have defied the odds by increasing their remittances to Sh24.3 billion in the first quarter of 2020. This is a significant feat, especially considering that investors, both local and foreign, are selling off their assets and repatriating funds to their home countries.
According to available data, the remittances came at a time when the country's foreign reserves were plummeting due to the decline in earnings from traditional exports and tourism. The stringent measures adopted to contain the pandemic had a devastating impact on these sectors, leading to a significant decline in revenue.
Traditionally, diaspora remittances are used for consumption purposes, leaving little room for investment. This leaves individuals exposed to the vagaries of the global economic cycles. To address this issue, the government could consider introducing an industrial bond that would be sold to local and diaspora investors to fund the establishment of industries that produce goods for export.
By doing so, the government would be able to provide a conducive environment for the investment of remittances, thereby addressing the current absurdity of inviting foreign investors to take advantage of concessionary terms negotiated with other governments. This move would also help to domesticate the manufacturing of export goods, making Kenya a more attractive partner for regional trading partners.
It is worth noting that the US might be reluctant to renew the African Growth Opportunity Act (Agoa) for countries like Kenya if they fail to domesticate the manufacturing of export goods. The original form of Agoa specified that export goods must have a high local content, and the Act was only amended when African countries pleaded for time to grow their capacity to increase local content.
Related Topics: Diaspora Remittances, Coronavirus, Money, KRA
