Diaspora remittances up 14.9pc to Sh52b in May
Kenyans living and working abroad sent home $404.4 million (Sh51.9 billion), a 14.9 per cent increase from the $352.1 million (Sh45.2 billion) remitted in April, with US emerging as the top source.
Cumulatively, according to the latest Central Bank of Kenya’s (CBK) latest weekly bulletin, inflows for the 12-month period to May 2024 totalled $4,509 million (Sh579.4 billion) compared to $3,997 million (Sh513.7 billion) in a similar period in 2023, an increase of 12.8 per cent.
“The US remained the largest source of remittances to Kenya, amounting to 48 per cent in May 2024,” the banking sector regulator noted.
The remittances helped prop up the usable Foreign exchange (Forex) reserves to $7,012 million (3.7 months of import cover) remained $7,012 million, equivalent to 3.7 months of import cover, meeting the CBK’s statutory requirement to maintain at least 4 months of import cover, the regulator said. There were concerns in February when Kenyans working and living abroad sent home Sh3.58 billion less than the previous month when the country had recorded the highest-ever remittance inflow in years.
Uptick in remittances
According to the CBK weekly bulletin remittance inflows for February amounted to $385.9 million, a 6.4 per cent decline from January’s record high of $412.4 million but this has since changed.
The uptick in remittances could be a result of increased employment opportunities for Kenyans abroad, especially in countries like Saudi Arabia.
Further, improved remittance channels through enhanced efficiency and reduced costs might also have made it easier for the diaspora to send money home.
The remittances contribute to money market stability by offering consistent funding that does not fluctuate with interest rates, leading to increased liquidity for banks. This lessens the reliance of on interbank markets and influences how monetary policy affects banking costs.
Moreover, remittances are generally stable, even during economic growth and have generally provided a reliable income source for Kenya families.
The remittances helped liquidity in the money market remain adequate, with CBK reporting that during the review week, Commercial banks reserves excess stood at Sh8.16 billion in relation to the 4.25 per cent cash reserves requirement.
According to CBK, the average interbank rate was 13.06 per cent, compared to 13.14 per cent the prior week, with the average number of interbank deals increasing to 47 from 44, while the average value traded declining to Sh21.6 billion from Sh28.9 billion previously.
The sector regulator also reported the Kenya Shilling remaining stable against dominant world currencies, exchanging at Sh130.72 per US dollar.
However, a weakening greenback against the local currency means receivers back home are not earning more in exchange as they used to be when the shilling was on a depreciating trend, which period even exporters enjoyed higher returns. The government is on record stating that it aims to raise the volume of diaspora remittances to Ksh1 trillion by 2027.
Diaspora remittances are important for building an economy since they are useful in promoting household income, stimulating and enhancing investment and catalysing growth.
Greener pastures
Africa’s growing diaspora community is increasingly becoming an important pillar for the growth and stability of local economies as the never-ending search for “greener pastures” sees Africans in the diaspora sending home almost double the amount that flows to Africa as foreign aid.
