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Kenyans in the diaspora defied the high cost of living to send home $378.1 million (Sh54.6 million) in July 2023, the highest monthly remittances to be recorded in recent times.

According to the latest Central Bank of Kenya (CBK) weekly bulletin for the period to August 18, the monthly remittances increased by $23.2 million (Sh3.3 billion) from the previous month’s $345.9 million (Sh49.9 billion).

Cumulatively, the inflows for the 12 months to July 2023 increased by 2 per cent to $4.076 billion (Sh588.4 billion) from $ 3.995 billion (Sh576.7 billion) recorded in the same period in 2022.

The inflows are the money used by Kenyans working abroad to support their families and friends back home. In addition, they are an important source of foreign exchange (Forex), which helps to finance imports, pay debts and build reserves in addition to supporting the current account by reducing the trade deficit.

“The strong remittance inflows continue to support the current account and the stability of the exchange rate. The US remains the largest source of remittances into Kenya, accounting for 55 per cent in July 2023,” CBK said. The move favours the Kenyans in the diaspora who can leverage the purchasing power of the dollar against the weaker shilling, including other major international currencies, to benefit from pushing the money back home through remittances.

As of August 17, the regulator said usable forex reserves remained adequate at $7.29 billion equivalent to Sh1.1 trillion or 3.98 months of import cover and meeting the CBK’s statutory requirement to maintain at least 4 months of import cover.

Reduce volatility

The regulator maintains Forex reserves to balance Kenya’s payments, help influence the rate and support confidence in the market. They are essentially CBK’s backup funds used to stabilise the shilling to reduce volatility.

During the week in review, CBK said the shilling remained relatively stable against major international and regional currencies, exchanging at Sh144.04 per US dollar on August 17, compared to Sh143.44 per US dollar the previous week.

The good news, according to the International Monetary Fund (IMF), is that the global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine, but it is not yet out of the woods.