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Money sent home from Kenyans working abroad increased by Sh3.3 billion in June to stand at Sh31.1 billion ($288.5 million) up from Sh27.8 billion ($258.2 million) in May, the Central Bank  of Kenya (CBK) has said.

In its weekly bulletin, the banking sector regulator said the 12 per cent increase was driven by growth in remittances from the United States, Saudi Arabia and South Africa.

“The cumulative inflows in the 12 months to June totalled $2,809 million (Sh302.4 billion) compared to $2,768 million (Sh291.6 billion) in the 12 months to June 2019, reflecting a growth of 1.5 percent,” reads the statement from CBK.

Global economies

That is currently the second-highest monthly receivables in 24 months since June 2018 after a high of almost Sh300 billion July last year as Covid-19 piles pressure on global economies.

However, June remittances were higher in value due to increased dollar strength against the shilling which closed on Friday at Sh108.13 to the dollar.

“The Kenya Shilling weakened against major international and regional currencies during the week ending July 23, on account of increased demand for dollars in the interbank market.

It exchanged at Sh108.13 per US dollar on July 23 compared to Sh107.35 per US dollar on July 16,” reads the statement.

Remittances from North America (US, Canada and Mexico) rose by Sh2.5 billion, to account for 56.5 per cent of the of the Sh27.78 billion sent to Kenya in May.

It is the second month in a row that remittances have reported an increase after a dip in April when it experienced a nine per cent decline to stand at Sh22.3 billion down from Sh24.5 billion in March.

Coming at a time when the Covid-19 pandemic is ravaging several parts of the world, especially the US and South Africa, the improved performance seems to defy an April projection by the World Bank which said that global remittances would reduce by about 20 per cent this year due to the virus.

World Bank projected low remittances, saying cash to middle-income countries (LMICs) would fall by Sh47.1 trillion, ($445 billion), a loss of crucial financing lifeline for many needy households globally.

Despite the good performance in diaspora remittances, the country’s foreign exchange reserves witnessed the highest drop in two years, due to an exchange rate volatility that saw the shilling drop to an all-time low.

The reserves dropped by $0.24 billion (Sh248 billion) to stand at $9.42 billion dollars (Sh1.01 trillion) in the week ended July 24 compared to USD9.66 billion (Sh1.04 trillion) the previous week at the current exchange rate.

Central Bank, however, says the foreign exchange reserve is adequate and can cover 5.72 months of imports, well above the statutory requirement of at least four months the East African Community requirement of 4.5 months import cover.

Import cover

“This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover, and the East African Community region’s convergence criteria of 4.5 months of import cover,” said CBK.

Last year, diaspora remittances stood at Sh280 billion, a 3.7 per cent rise compared to the Sh269.7 billion dispatched in 2018.

Remittances have recently become Kenya’s biggest source of foreign exchange, beating tourism, tea, coffee, and horticultural exports, which come second, third, fourth, and fifth position respectively.