In October 2023, Kenyans living abroad displayed a generous commitment to their home country by sending an additional Sh2.3 billion in remittances. This marked a significant increase from the previous month’s total of $340.4 million or Sh51.89 billion. Despite its significance, this surge had only a marginal impact on Kenya’s forex reserves, which continued to weaken, reaching an all-time low of Sh1.03 trillion, equivalent to just 3.6 months’ worth of import cover. For comparison purposes, the figures stood higher last month at Sh1.04 trillion, representing approximately 3.67 months.
The latest data from the Central Bank of Kenya (CBK) reveals that remittance inflows for October amounted to $355.6 million (Sh54.2 billion), indicating a 6.9% increase from the corresponding period in 2022, an encouraging statistic. Over the twelve months leading up to October 2023, cumulative remittances surged significantly, reaching $4,165 million or Sh634.9 billion, compared to figures recorded during the same timespan last year, a remarkable rise of precisely 4.2%.
This uptick in remittances could be attributed to various contributing factors. The alleviation of inflationary pressures in key markets, notably the United States, provides a plausible explanation. Moreover, the strength of the dollar against a weakening Kenyan shilling might incentivize migrant workers to increase their homeward money transfers, aligning with Western Union’s Global Money Transfer Index projections.
In July and August, the observed high eventually led to a dip in remittances by September, falling to $340.4 million (Sh51.89 billion), a notable decrease. However, this decline did not disrupt the overall positive trend, as Kenyan expatriates set a record for the highest-ever remittance amount in July 2023.
Despite these escalated remittances, seemingly inadequate for reinforcing the nation’s forex reserves, they fell below the statutory demand of sustaining a minimum import cover for four months. The reserves marked $6,785 million (Sh1.03 trillion) in October, underlining an enduring struggle to surpass this benchmark.
The United States continued to contribute 54 percent of the total remittances as the largest source in October 2023. Intriguingly, Saudi Arabia emerged as a notable contributor, sparking discussions for a bilateral agreement between Nairobi and Riyadh. The proposed accord seeks to create an organized framework for professional recruitment destined for work within Saudi Arabia.
Kenyan expatriates in Saudi Arabia, during 2022, sent a substantial $302.26 million (Sh46 billion) back home. This amount marks an impressive increase from the previous year’s remittance of $185.01 million (Sh28.2 billion). This surge holds particular significance as it counters challenges brought about by elevated global inflation, a factor that has been adversely affecting remittances from other key sources.
Kenya’s foreign exchange profits hinge significantly on the pivotal role that diaspora remittances play, surpassing earnings from tea, coffee, and tourism. The tourism sector experienced an 80 percent decline in its revenues compared to 2019 due to a severe blow dealt by the Covid-19 pandemic in 2020. This is notably significant.