Diaspora Kenyans Cut Money Remitted Home by Sh2 Billion

Kenyans living and working abroad reduced their remittances to their home country by Sh2 billion in September despite the easing inflationary pressure in key markets such as the US.

This marks the second consecutive month of decreased inflows, with $340.4 million (Sh50.2 billion) sent back home compared to $354.3 million (Sh52.2 billion) in August. Unfortunately, this reduction in remittances did not provide much support to the country's forex reserves, which continued to weaken. The forex reserves dropped to $6,833 million (Sh1 trillion), equivalent to about 3.67 months of import cover, from $6,872 million (Sh1.01 trillion) the previous week. Despite this, the Central Bank of Kenya remains optimistic, stating that the remittance inflows are still strong and continue to support the current account and foreign exchange market.

In September 2023, remittance inflows totalled $340.4 million (Sh50.2 billion), a 7.1 per cent increase compared to September 2022. According to the CBK's weekly update, the cumulative inflows for the 12 months leading up to September 2023 amounted to $4,142 million, a 3.5 per cent increase from the same period in 2022. In July, Kenyans set a new record by sending back home the highest-ever amount of $378.1 million (equivalent to Sh55.8 billion). The weakening of the shilling, which now stands at Sh149.58 against the US dollar, was expected to drive an increase in remittances, according to the Western Union's Global Money Transfer Index.

However, this projection has not yet materialized, with only July seeing a significant rise in inflows despite the further weakening of the Kenyan currency in subsequent months. The US remains the largest source of remittances, accounting for 57 per cent in September 2023. Recently, Saudi Arabia emerged as a major contributor to the rapid growth in remittances to Kenya. This has prompted Nairobi to engage in discussions for a bilateral agreement with Riyadh, aiming to establish a structured framework for the recruitment of professionals to work in Saudi Arabia.

In 2022, Kenyan expatriates residing and working in Saudi Arabia sent a total of $302.26 million (equivalent to Sh44.6 billion) back home. This marked a significant increase from the $185.01 million (Sh27.3 billion) remitted in 2021, despite the challenges posed by high global inflation affecting remittances from other key sources. In 2017, diaspora remittances surpassed the revenues generated from tea, coffee, and tourism, becoming Kenya's leading source of foreign exchange earnings. Experiencing a significant blow from the COVID-19 pandemic, the second-largest contributor to foreign exchange earnings saw an 80 per cent decline in sector revenues in 2020, compared to the Sh162 billion generated in 2019.

The IMF's recent finance and development report highlights the vital role played by diaspora remittances in a country's development, noting that migrant workers are consistently increasing the amount of money they send back home each year. This ongoing trend is fueled by economic shifts that continue to motivate individuals to migrate in search of better opportunities. According to an analysis by WorldRemit, remittances in Kenya are primarily used for education, healthcare, and household needs.