Kampala — Remittances from Ugandans working abroad, locally called kyeyo, dropped by more than 56% from $800m (sh1.6 trillion) to $350m (sh735b) in the first quarter of the year.

The fall is set to cause a negative impact on the construction sector and small business enterprises that depended on funds from relatives abroad.

Speaking at a press conference on Friday, Bank of Uganda director Henry Opondo said the construction of personal houses was expected to slow down.

According to the bank's projections, the small and medium scale enterprises would also be affected.

"The fall arose out of the fact that recession has affected jobs in Europe," said Opondo.

Opondo said many Ugandans working abroad have indicated that they would be returning home. "Some of the kyeyo might come back but they might not come back empty handed."

The most affected are the middle working class and those in the business sector. Those doing odd jobs are not affected.

"Seriously affected are those who own business particularly the mortgage business. Those in the housing sector in UK and US have been badly affected. The business communities are sadly affected as well," said Maggie Kigozi, executive director of the Uganda Investment Authority.

The remittances represent direct dollar inflows into the economy, different from foreign direct investment, which has also fallen from $778.4m to 735.4m, indicating a 5.5% drop in last financial year.

In the last decade, remittances have been central to the economy, having surpassed coffee, which only fetched $348m last year, as a foreign exchange earner.

According to Opondo, the projections are that the kyeyo cash will increase slightly to $500m (sh1 trillion) in 2010. Normally, remittances peak during the festive seasons mainly in December and during the opening of school terms.

However, between last December and early 2009, Ugandans abroad reduced the amount of money they were sending due to the economic crunch.

The biggest amount of kyeyo cash comes from the UK, USA, Sweden, South Africa, Canada and Japan.

The big employers in these countries continue to slash jobs and cut pay, as consumer spending takes a downturn. "All these layoffs have an impact on remittances," explained Kigozi.

Meanwhile, Uganda's investment sector has continued to grow. The investment authority licensed 65 projects with a planned value of $4.2b, expected to create 8,422 jobs.

Announcing the figures on Friday, Kigozi named UK as the highest source of investment of $211m from five projects.

Other big investors are India, Kenya, Japan, Iran, China, Israel, Canada, Denmark and Sweden.

The manufacturing sector has the highest value of planed investment amounting to $185m or 44.8% of all planned investments.

The finance sector followed closely with $157m from 18 projects, but with the highest number of jobs created.

To help boost local investments, Kigozi said they had been allocated sh21b to set up a division to guide entrepreneurs of small businesses on how to sustain them.