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Category: Diaspora News

Written by Reuters

NAIROBI (Reuters) - Kenya plans to raise nearly $600 million from its citizens who live abroad by the end of this year, through targeted debt instruments, its central bank governor said on Friday.

The plan represents the latest tool used by officials to build up hard currency reserves and support the east African nation's currency, the shilling, which has lost more than 10 percent against the dollar this year, weighed on by strong domestic demand and high oil prices.

Governor Njuguna Ndung'u told Reuters in a statement that the first part of the plan involves the $400 million that the government wants to borrow through an infrastructure bond in its 2011/12 fiscal year.

"This is the component that the Central Bank plans to target not only to domestic borrowers but also for the first time, to the Kenyan Diaspora," he said.

"It is anticipated that the foreign currency amounting to approximately $400 million will be retained by Central Bank and the shilling equivalent passed on to government for implem enting the infrastructure projects targeted."

The World Bank estimates that Kenyans abroad hold up to $1.8 billion in checking accounts earning zero interest and the proposed infrastructure bond will therefore provide an at tractive alternative investment, he added. There are many Kenyans in western nations as well as in Africa who moved there mainly due to economic reasons.

"Once this first step is successfully accomplished, other lucrative bonds such as the 30 year Savings Development Bond and other long tenured bonds would be rolled out to the same Kenyans living abroad in the same way," Ndung'u said.

"The CBK (Central Bank of Kenya) is likely to raise close to $600 million with these instruments by the end of this calendar year."

Kenya, which is east Africa's biggest economy, received a record $642 million from citizens sending money home in 2010 -- nearly 2 percent of annual domestic output -- up from $609 million in 2009 and $611 million the year before that.

Economic experts say most of the funds remitted are usually for consumption rather than for investments, as those abroad send small amounts to their families back home.