North America, Europe and the rest of the world accounted for 48 per cent, 20 per cent and 31 per cent, respectively, of the remittances in July 2019,
The flow of money into the country from Kenyans living and working abroad dropped in July compared to June after the return of taxable money stashed outside the country.
The Central Bank of Kenya weekly bulletin shows diaspora remittance for July stood at $224 million (Sh23.07 billion) compared to $295 million (Sh30.3 billion) in June, signaling a 31.6 per cent drop.
The drop is coming barely a month after the country recorded an all- time high in the remittance inflows in June as people rushed to beat the tax amnesty deadline.
The government had in 2016 amended the Tax Procedures Act to introduce Section 37B which granted amnesty on foreign income that had been earned on or before December 31, 2016.
This was later amended on April 3, 2017, extending the deadline to allow full amnesty provided the foreign income was declared and funds realized were transferred to Kenya no later than June 30, 2018.
The amnesty was further extended to June 30, despite concerns that it would lead to inflows of illicit cash including proceeds from corruption.
Even so, former Treasury CS Henry Rotich was silent on the matter when he presented the 2019/2020 budget statement in June, meaning, any money repatriated into the country starting July 1 attracted a 10 per cent tax penalty.
The 12-month cumulative inflows during the period under review however increased to $2,778 million (Sh286.1 billion ) from $2,501 million (Sh257.6 billion) same period last year, reflecting a growth of 11.1 per cent.
‘’North America, Europe and the rest of the world accounted for 48 per cent, 20 per cent and 31 per cent, respectively, of the remittances in July 2019,’’ CBK report said.
The significant drop in diaspora remittance continued to weigh down on the country’s forex reserve, with CBK data showing that they shrunk to $9,218 million (Sh949.4 billion) or 5.76 months of import cover by Friday compared to $9,252 million (Sh952.9 billion) or 5.78 months of import cover as at August 29.
Jared Mengeso, a senior money expert at a local investment company told the Star the double effect of shrinking forex reserves and excess liquidity of local currency in the market as the public rush to replace old Sh1000 notes ahead of September 30 deadline will likely shrink the shilling’s value.
‘’We should expect the shilling to tumble in coming weeks if the sole support muscle (forex reserve) is shrinking,’’ Mengeso said.
According to CBK, the shilling depreciated marginally against major international and regional currencies during the week ending September 5. It exchanged at Sh103.82 per dollar on September 5, compared to Sh103.48 on August 30.
The remittances in Kenya have risen to become the biggest source of foreign exchange, ahead of tourism, tea, coffee and horticulture exports.
They have played a big role in the stability of the shilling in the past one year since the country’s precautionary from the International Monetary Fund (IMF) expired.