“There has been a significant drop in remittances from the European area in the last few months, we don’t know when the trend will reverse,” said Frida Nzilani of Sky Forex Bureau.
Europe, which accounts for 27 per cent of the total remittances from Kenyans working abroad, is reeling under the weight of huge domestic debts.
“Investment instruments like mortgages are going to be affected due to reduction in incomes and job losses”, said Mr. Karisa Yaa, treasury manager at Kenya Commercial Bank.
An earlier report by the Central Bank had indicated a decline of three per cent, but market analysts warn the trend may dive further even as most Euro zone nations adopt austerity measures to curtail spending hence shrinking growth.
“Economies already in a crisis like Greece, Spain and Britain will see taxes hiked, an issue that will prompt layoffs and salary cuts” said Mr. Chris Muiga, a trader with Kenya Commercial Bank in an interview with the Business Daily.
“The decline of Greece into her current economic woes has sent jitters across the Euro zone creating a lull in what would have been otherwise a resurgent economic growth, ” said Karisa.
Kenya has been experiencing growth in the value of remittances from the diaspora for the last five years owing to the increasing number of skilled Kenyans abroad. They were, however, hit by the last global financial crisis, a resurgent upward trend has again come under pressure from the euro zone debt crisis.
The annual aggregate figures have maintained a steady upward trend from $338 million in 2004 to $609 million in 2009 except between 2008 and 2009 when there was a lag arising from the global financial crisis.
The decrease in remittances from $611 million in 2008 down to $609 million in 2009, a three per cent decline, arose from job losses and the liquidity crisis occasioned by the subprime mortgage crisis that hit Europe and North America.
Industry players attributed the persistent long run increase in cash inflows to the increasing number of Kenyans looking for employment abroad.