- The US is Kenya's leading source of diaspora remittances, accounting for 58 per cent of receivables.
- The inflows reported in July are the lowest since June last year when the country received $306 million.
The amount of money sent home by Kenyans working abroad dropped for the sixth consecutive month in July attributed to the high cost of living globally.
Although the Central Bank of Kenya did not give reasons for the persistent drop, reports by JP Morgan show diaspora remittances have dropped in recent days due to rising expenditure on basic needs, leaving less to dispose of.
According to the American multinational investment bank and financial services, diaspora remittances have fallen by 4.8 per cent globally as leading economies like the US report the highest inflation in 40 years.
Even so, falling prices for gas, airline tickets and clothes gave Americans a little bit of relief last month, though overall inflation is still running at close to its highest level in four decades.
Consumer prices jumped 8.5 per cent in July compared with a year earlier, down from a 9.1 per cent year-over-year increase in June.
The US is Kenya's leading source of diaspora remittances, accounting for 58 per cent of receivables.
Data by the CBK shows diaspora remittances to Kenya last month totaled $319.4 million (Sh38 billion) compared to $336.7 million (Sh40 billion) in July last year, a 5.1 per cent drop.
The inflows reported in July are the lowest since June last year when the country received $306 million.
This was almost Sh1 billion lower compared to $326.1 (Sh38.9 billion) sent in June and Sh2 billion less the previous month.
The cumulative inflows for the 12 months to July hit $3.995 billion (Sh474.8 billion) compared to $3.44 billion (Sh409 billion) in the same period last year, an increase of 16.1 per cent.
''The strong remittances inflows continue to support the current account and the stability of the exchange rate,'' CBK said.
Diaspora inflows have been shrinking since January when the country posted a high of $338.7 million.
Data from CBK indicate that the USA contributed $ 186.5 million during the month under review compared to $ 209.1 million similar month last year.
The largest source of diaspora remittances to Kenya in Africa was Tanzania, with $3.9 million.
It is followed by Uganda, which contributed $2.6 million, South Africa $2.4 million, Malawi $527,000, Nigeria $508,000, Zambia $297,000, Ivory Coast $291,000, Egypt $221,000 and South Sudan $177,000.
The diaspora inflows, however, did not have an effect on the country's dwindling forex reserve and depreciating shilling.
According to the CBK Weekly Bulletin, the shilling dropped further against the greenback, exchanging at 119.47 on August 18, compared to 119.24 on August 11.
The shilling has been dropping against major international currencies for 1lmost 17 months now, shedding six per cent in value.
The country's FX reserve position worsened further in the week ended August 18, sinking below East Africa's threshold of 4.5 months of import cover.
According to the apex bank, the usable foreign exchange reserves remained adequate at $7.621 billion (4.39 months of import cover) compared to $7.68 billion or (4.43 months of import cover).
Although CBK has not given reasons for the dropping reserves, it has hinted before that it uses the stored currencies to shield the shilling against volatilities in the global market.
The amount held, however, meets, the CBK’s statutory requirement to endeavor to maintain at least four- months of import cover.
The low diaspora inflow and declining revenue from exports have worsened the country's current account balance.
Kenya’s current account deficit as a percentage of GDP widened to 5.1 per cent in April from 4.8 per cent a year earlier due to higher import costs for fuel, food and industrial goods that outweighed higher inflows from agriculture exports and diaspora remittances.
In the 12 months to March 2022, the latest CBK data shows Kenya imported goods worth Sh2.23 trillion against export earnings of Sh789 billion recording a trade deficit of Sh1.44 trillion.
Kenya's export earnings have witnessed a downward trend in the past five years, with diaspora remittances now the country's highest forex earner.
Government data shows tea and coffee earnings have been shrinking in recent times due to high global supply and falling prices.
The two crops have for long been Kenya's main forex earners.
Last week, the Horticulture Directorate said earnings for the first six months of the year declined by 40 per cent to Sh48.4 billion from Sh80.7 billion on the back of reduced returns from flowers, vegetables and fruits.