Kenya risks $40m monthly remittance loss amid Middle East crisis

Kenya could lose as much as $40 million in monthly remittance inflows as the Middle East crisis disrupts a key source of foreign income, underscoring broader risks for African economies that rely heavily on diaspora funds.

According to the World Bank, the conflict has heightened vulnerabilities around remittance flows from the Gulf, where large numbers of African migrant workers are employed in construction and service sectors.

“The conflict has heightened risks to these flows, threatening an essential income source for countries such as Kenya, which could face monthly losses of up to $40 million,” the multilateral lender said in its latest Africa Development Report.

Remittances are one of the most stable and significant external financing sources for many African countries, supporting household consumption, reducing poverty and providing critical foreign exchange buffers—often exceeding foreign direct investment and aid flows in several economies.

The funds from Gulf countries remain a lifeline for many African economies—particularly in East Africa—helping to sustain household incomes and support external balances. Data from the Central Bank of Kenya shows that cash sent home by Kenyans living and working abroad grew 1.9 percent in 2025 to $5.04 billion (Sh649.5 billion), marking the slowest annual expansion since the aftermath of the 2008 global financial crisis.

The World Bank warned that a prolonged conflict could further weaken inflows as employment prospects deteriorate, hiring slows and layoffs increase in sectors such as hospitality and construction. “A protracted conflict could further reduce remittance inflows as employment prospects weaken, new hiring slows, and repatriations rise amid contractions in sectors such as hospitality and construction.”

Across the continent, the impact is already being felt, with households facing increased financial strain in countries where remittances account for a significant share of economic output, including Comoros, The Gambia, Lesotho and Liberia, where inflows make up close to 20 percent of GDP.

The recent escalation in tensions involving the United States, Israel and Iran has injected fresh uncertainty into global markets, with benchmark oil prices surging above $100 per barrel following the outbreak of the conflict in February.

Prices briefly eased below that level last week after a ceasefire announcement between the US and Iran, but rebounded above $100 on renewed tensions after America’s President Donald Trump signalled plans to impose a naval blockade on Iran.

For fuel-importing African economies, the impact has been immediate. Rising pump prices are feeding into higher transport, food and production costs, eroding purchasing power and threatening to reverse recent disinflation gains.

Currency pressure mounts as central bank intervenes

The disruption to remittance flows is compounding pressure on Kenya’s external position, with the CBK stepping up interventions to stabilise the currency. Kamau Thugge, the country’s central bank governor said last week that the country has spent nearly $1 billion of its foreign exchange reserves since the conflict escalated, as authorities moved to curb excessive volatility in the shilling.

Authorities deployed about $941 million in the four weeks to April 2, helping to keep the currency trading within a narrow band around 129 per dollar—a level it has largely maintained for nearly two years. Although the shilling briefly weakened past 130 earlier in the week amid a global market selloff, it rebounded to trade around 129.20 against the dollar, about 0.5 percent stronger on the day.

Economic strain already visible

In Kenya, early signs of strain are emerging.

Private sector activity fell to an eight-month low in March, with the latest Purchasing Managers’ Index from S&P Global declining to 47.7 from 50.4 in February—its first contraction since August.

Inflation also edged higher for the first time in three months, according to the Kenya National Bureau of Statistics, driven by rising food and energy costs. Food and non-alcoholic beverage prices rose 7.7 percent, transport costs increased 3.8 percent, while housing and utilities climbed 2.0 percent—categories that account for more than half of the consumer basket.