The fate of foreign exchange remittances from Kenyans abroad - a crucial economic revenue stream- hangs in the balance because of political uncertainty.

Although Central Bank figures show a month-on-month improvement in volumes from $41.4 million (Sh2.9 billion) in December before post-election violence broke out to $53.9 million (Sh3.7 billion) last month, analysts say foreign inflows were largely dependent on a speedy resolution of the political standoff.

The cash remittances have recently helped to stabilise the shilling's exchange rate and provided a source of investment funds

In the event of a protracted political crisis, the remittances are likely to trickle down to mere subsistence aid to relatives by Kenyans in the diaspora, cutting down on investment-focused payouts.

Official CBK statistics, which have however, been viewed as being too conservative, show that foreign exchange remittances by Kenyans abroad have risen steadily from $338 million (about Sh23.7 billion by current rates) in 2004 to $382 million in 2005, $408 million in 2006 and $574 million (Sh40.2 billion) last year.

The World Bank estimates that Africa receives about $5 billion annually in remittances from abroad, with about a quarter ($1.25 billion) of the funds coming to Kenya alone.

The huge amount is spent on food, education and health needs of the senders' relatives; as well as on investments in real estate, Stock Exchange and the transport sector with returns shared between those in the diaspora and their local dependants.

The steady rise in the forex remittances over the years and the improvement in earnings from tourism and agricultural exports have also cushioned the shilling from wild fluctuations against major foreign currencies, and in fact contributed to a rally that saw the local unit close the year pegged at a strong level of Sh63.50 to the dollar as at December 24, last year.

But all this positive economic contribution now stands in jeopardy following a disputed December presidential poll that has thrown the country into political turmoil and could force Kenyans in the diaspora to re-evaluate their level of remittances, particularly those meant for investments.

Zimele Asset Management's investment manager Isaac Njuguna says Kenyans abroad could scale down their development focused remittances and restrict their releases to basic assistance if the current political uncertainty persists.

Mr Njuguna, however, says this is likely to be an unfortunate scenario since the trend in recent years has been an increasing proportion of investment focused remittances as the country enjoyed an uninterrupted five year economic growth period.

"If the current situation persists we are only likely to see a completion of the old development projects but no commencement of new ones," says Mr Njuguna.

Remittances to Africa have become such an important revenue source that the World Bank announced towards the end of last year that it intended co-ordinate the collection of these funds and use them to fund its proposed $13 billion projects in Africa over the next three years through a structured fund that will support the continent's development goals.

"The World Bank is in a very strategic position to assist in the mobilisation of the African Diaspora in support of economic development on the ground in Africa" said Melvin Foote, President of the Constituency for Africa (CFA) a 16-year-old Washington-based network of groups and individuals professing commitment to progress in Africa in December last year.

Foreign exchange dealers also fear that the shilling, which has depreciated by about seven shillings to the dollar since announcement of the disputed poll to the current exchange rate of about Sh70 could take a hit from a slow down in the remittances.

"Reduced remittances are likely to work against the shilling and contribute to its weakening against major currencies," says Mr Alex Ngaine, a forex dealer at Stanbic Bank.

A reduction in investment focused remittances could also slow down overall economic growth, estimated to have hit the seven per cent growth mark last year.