Diaspora Leaders Slam Finance Bill 2024 Provisions

Community stakeholders, diaspora organizations, and experts have united in urging the Kenyan government to reconsider the proposed changes outlined in the Finance Bill 2024.

Their primary concern revolves around the potential increases in mobile money and excise duty rates, advocating for the maintenance of current levels or a reduction in the proposed hikes. Additionally, the introduction of Value Added Tax (VAT) on select financial services, including foreign exchange, cheque handling, and money securities issuance, has raised apprehensions about the far-reaching implications for both businesses and consumers. At the International Day of Family Remittances event in Nairobi, Dr Shem Ochuodho, the global chairman of the Kenya Diaspora Alliance, emphasized the significance of fostering enabling environments for diaspora investments and engagement in developmental projects.

He called for concerted efforts to create these supportive conditions, alongside engagement and empowerment measures. Furthermore, Ochuodho urged the government to incentivize the diaspora to continue remitting and investing in the country, including in government bonds, recognizing the crucial economic contribution of remittances. The Central Bank of Kenya has observed an impressive surge in remittance inflows, reaching a record high of $4.2 billion in 2023. According to Dr Koech, these inflows not only bolster the country's foreign exchange reserves but also provide crucial support for the livelihoods of vulnerable households.

With an estimated four million Kenyans residing abroad, the diaspora represents a valuable asset for Kenya's economic development, as emphasized by the Ministry of Foreign Affairs. However, to fully harness this potential, a robust policy framework is essential to facilitate effective diaspora engagement. Kenya Diaspora Alliance Marketing Manager Cizarina Nasirumbi emphasizes the importance of a formal policy framework in removing obstacles and creating an enabling environment for the diaspora's participation. Such a framework would facilitate the government's outreach efforts and provide a structured platform for introducing necessary legislative and policy reforms.

David Berno from the International Fund for Agricultural Development echoes the need for inclusive policy frameworks involving both governmental and non-governmental stakeholders to support impactful diaspora initiatives. The effectiveness of these strategies could be significantly improved by empowering individuals, addressing their specific needs, and creating supportive environments that facilitate their growth and success. Despite these efforts, the challenges surrounding remittance corridors remain significant, particularly in terms of the associated costs.

Amb. Isaiya Kabira from the State Department for Diaspora Affairs highlights the persistently high expenses in certain corridors, which poses a dilemma for both senders and recipients. The cost of sending $500 to Kenya in 2023 was 8.3% of the amount remitted, only a slight decrease from 8.4% five years ago, and still higher than the Sustainable Development Goal (SDG) 10.C.1 target of 3%. The Kenya-Tanzania and Kenya-Rwanda corridors continue to be costly at 34.1% and 11.5% respectively, primarily through bank channels. As the Finance Bill 2024 undergoes legislative scrutiny, Central Bank Governor Kamau Thugge has expressed support for the proposed tax increases, citing the need to raise revenue and address public debt.

However, experts caution that these changes could have substantial implications for stakeholders if implemented without careful consideration.