- The cumulative inflows for the 12 months to January 2024 totaled Sh620.3 billion compared to Sh589 billion in the same period in 2023, a 5.3% increase.
- The US remained the largest source of remittances into Kenya, accounting for 54% in the period under review.
Image: FILE
Kenyans working and living abroad took advantage of the DhowCSD platform to buy into local bonds, sending home the highest amount ever in January.
The latest data by the Central Bank of Kenya (CBK) shows remittance inflows increased to $412.4 million (Sh60.15 billion) in January 2024 compared to $372.6 million (Sh54.3 billion) in December 2023, representing a 10.7 per cent increase.
This is an 18 percent increase compared to the similar month the previous year.
Although the apex bank did not give reasons for the rising remittances, experts are linking the high diaspora receipts to the participation of Kenyans in the diaspora in the local bond market via the DhowCSD platform which was launched by President William Ruto in September last year.
The platform has, for instance, eliminated manual processes in the opening of trading accounts with the time taken to set up an account dropping from 14 days to just minutes.
The reduced turnaround time has led to the growth in the number of trading accounts in less than two months of the new platform’s rollout.
On Wednesday last week, the Central Bank of Kenya (CBK) revealed that the local infrastructure bond seeking to raise Sh70 billion attracted bids worth Sh288.6 billion, with the state accepting Sh240.9 billion.
Diaspora Kenyans’ participation in the trade seemed to have played a key role in driving January inflows to the highest value ever recorded.
“The cumulative inflows for the 12 months to January 2024 totaled $4,253 million (Sh620.3 billion) compared to $4,039 million (Sh589 billion) in the same period in 2023, an increase of 5.3 per cent,” CBK says in its weekly bulletin.
The US remained the largest source of remittances into Kenya, accounting for 54 per cent in January.
The new record surpasses the July 2023 record of $378.1 million, which was then the highest-ever amount to be sent home by the diaspora Kenyans.
Inflows for December which had increased by five percent from $355 million in November, was the second highest then, now making the third highest month in terms of inflow value.
The increased inflows could also be on the back of the weak shilling that crossed the 160 mark in the period under review, pointing towards Western Union’s projection that the weakening shilling against the greenback will likely increase remittances.
In its inaugural Global Money Transfer Index in March last year, it said about 67 percent of Africans abroad send more money when the currency value falls in their receiving country, with 65 percent of receivers agreeing that when currency values fall, they get more money.
On January 15, the shilling officially crossed 160 unit points against the US dollar, the lowest level on record.
CBK blamed the depreciation of the shilling on the $2 billion (Sh300 billion) Eurobond.
The depreciation made imports more expensive while at the same time pushing up Kenya's debt.
However, the shilling in the past week has strengthened against the US dollar, gaining about 15 units from the lows of 160 in January to trade at 145.85 on Friday, according to the regulator.
This could be on the back of the recently issued $1.5 billion Eurobond to buy back the inaugural one due in June 2024.
In a statement, the National Treasury said the new loan divided into three installments has a weight average life of six years and is expected to mature in 2031.
"The proceeds of the 2023 Eurobonds will fund the offer to buy Kenya's existing $2 billion Eurobonds due in 2024,'' the exchequer said.
It added that the combined transactions are a crucial part of the government strategy to smoothen the maturity profile of the 2024 Eurobonds and proactively manage debt liabilities.
The country also recently received a loan from the IMF and the Trade Development Bank (TDB), cushioning the country’s Forex reserves which in turn eases the dollar pressure from importers, a reason financial experts argue could be doing good to strengthen the shilling.
IMF last month wired in an equivalent of Sh109 billion, whereas TDB offered $210 million (Sh33.7 billion).
Combined with increasing remittance inflows, the forex reserves have received a boost to remain adequate at $7,031 million, just about 3.8 months of import cover as of February 15.
It is a 3.2 per cent increase in a month, from $6,814 (3.6 months of import cover) recorded on January 18.
The 3.8 is slightly below the statutory requirement of at least four months of import cover and way below that of the East African Community's (EAC) 4.5 months of import cover.
The cumulative inflows for the 12 months to January 2024 totaled Sh620.3 billion compared to Sh589 billion in the same period in 2023, a 5.3 per cent increase.
The US remained the largest source of remittances in Kenya, accounting for 54 per cent in the period under review.
The regulator, however, still maintains a brave face saying the levels meet CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover.
Reserves are mostly dollar-denominated and act as buffers to potential external shocks for the country.