Kampala — Uganda received $6.28b from citizens living abroad between 2013 and 2018 in remittances outpacing foreign direct investment (FDI), which stood at $1.5b in 2016, according to data from the World Bank.
The data indicates that remittances have in the period become the largest source of external financing amid falling FDI figures.
Uganda's FDI fell by 14.2 per cent to $1.3b in 2017 from $1.5b in 2016.
The same was witnessed across East Africa with Kenya, which received $10.74b, topping the region in terms of remittances from the country's citizens abroad.
However, Kenya's FDI inflows dropped by 60.6 per cent to $717.7m, down from $1.8b in the period running between 2013 and 2018.
South Sudan received $2.85b in remittances while Tanzania received $2.39b. Rwanda and Burundi received $1.13b and $257m, respectively.
The World Bank's Migration and Development Brief indicates that the volume of remittances into the five East African countries increased by more than 60 per cent to $4.66b in 2018, from $2.84b in 2013.
However, the increase comes at a time when FDI continues to fall. According to the 2017 EAC trade report East Africa's FDI inflows declined by 25.3 per cent to $6.6b in 2017 from $8.8b in 2016.
Kenya recorded the highest decline - to $717.7m from $1.8b - followed by Uganda, whose FDI fell by 14.2 per cent to $1.3b from $1.5b between 2016 and 2017.
Tanzania recorded a 7 per cent drop in FDI to $3.3b from $4.8b in the same period.
However, FDI inflows to Burundi increased to $146m from $65.1 million, while in Rwanda FDI grew to $1.2b from $600.
Cost of sending money
According to Mr Dilip Ratha, the World Bank lead economist in charge of migration and remittances and the lead author of the Migration and Development Brief, the high cost of money transfers continues to reduce the benefits of migration.
Commercial banks are the most expensive remittance channels, he said, charging an average fee of 11 per cent in the first quarter of 2019, followed by post offices at over 7 per cent.
The global average cost of sending $200 remained high, at around 7 per cent with sub-Saharan African countries recording the highest at 9.3 per cent.