- This has pushed the country's forex reserves, moving to a low of 3.8 months of import cover as at September 14.
- The mark is below the regulatory requirement to have at least reserves worth four months of import cover at any given time.
Image: FREDRICK OMONDI
The amount of money sent home by Kenyans living and working abroad in the month of August did little to support the country’s forex reserves which started weakening yet again.
Weekly data from the Central Bank of Kenya (CBK) shows Kenyans abroad sent home $354.3 million (Sh51.5 billion), a 6.4 per cent decrease from the previous month.
This triggered a dim in the country's forex reserves, moving to a low of 3.8 months of import cover as at September 14, an equivalent of $7.1 billion (Sh1.03 trillion).
The mark is below the regulatory requirement to have at least reserves worth four months of import cover at any given time.
It crossed below the regulatory mark on August 17 to stand at 3.98 months, after maintaining the above four months mark for two months in a row.
It last witnessed the below average mark on June 2, when it stood at 3.62.
However, the apex bank maintains a brave face saying the reserves remain adequate and meets the statutory requirement to endeavor to maintain at least four months of import cover.
Although the banking regulator did not give reasons for the decline in August inflows, experts are linking the shifting trends in inflows to the current unpredictable economic situation globally, with effects of high inflation still squeezing disposable income.
Financial expert Dan Mambo says inflation which hit a 40-year high in most countries which contributes to Kenya's diaspora inflows, have since had an effect on the amount the diaspora community sends back home.
"This uncertainty is expected to persist as the anticipated recession manifests. This is a blow to Kenya's weak shilling as forex reserves meant to cushion it will keep dwindling,'' Mambo said.
Despite the decline in flows from the previous month, CBK says compared to the same period last year, the inflows recorded a 14.1 per cent increase from $310.5 million (Sh45.2 billion).
“The cumulative inflows for the 12 months to August 2023 totaled $4.12 billion (Sh599.4 billion) compared to $3.99 billion (Sh580.7 billion) in the same period in 2022, an increase of 3.2 per cent,” CBK says in a statement.
“The strong remittances inflows continue to support the current account and the stability of the exchange rate, with the US remaining the largest source of remittances into Kenya, accounting for 54 per cent in August 2023.”
Diaspora remittances are now Kenya's forex earner after overtaking tea, coffee and tourism in 2017.
The tourism sector which used to be the second most forex earner was the worst hit by Covid-19, with sector revenues declining by 80 per cent in 2020 compared to 2019 when the country realised Sh162 billion.
Data from the Ministry of Tourism shows the tourism sector directly contributes 4.4 per cent of the Gross Domestic Product (GDP).
However, the sector is showing a great recovery with international arrivals hitting pre-covid levels.
A recent finance and development report by IMF reiterates the critical role diaspora inflows play in developing countries, saying the migrant workers are increasingly sending home more money year-on-year.
This, as economic shifts continue to prompt more people to migrate in search for greener pastures.
"Global remittances reached a record $647 billion (Sh94.6 trillion) in 2022, three times higher the official development assistance," IMF says.
In the case of migrant Kenyans, they have been sending home record amounts in the past three years with inflows reaching $4.03 billion (Sh589.7 billion) in 2022.
This was an 8.9 and 30 per cent increase from the record value of $3.7 billion (Sh544.3 billion) and $3.1 billion (Sh453 billion) in 2021 and 2020, respectively.
For the six months period to June this year, Kenyan migrant workers have sent home $2.03 billion (Sh297.7 billion), having been partly fueled by the weakening shilling that has seen those in the diaspora capitalise on.