Kenyan diaspora remittances have soared to record levels, reaching $4.997
billion (Sh645 billion) in the 12 months to April 2025, with over half of that
coming from the United States.
But this critical source of foreign income now faces a looming threat from
proposed U.S. taxation measures targeting immigrant remittances.
According to the latest data, the U.S. contributed
56 per cent of total remittance inflows to Kenya in April 2025, amounting to
$422.9 million (Sh55 billion).
In 2024, remittances from the U.S. totalled $2.63 billion (Sh340 billion),
surpassing revenue from Kenya’s traditional exports like tourism, tea, and
horticulture.
Remittances now contribute an estimated 4.6 per cent of Kenya’s GDP and have become
the country’s top foreign exchange earner.
However, this upward trend may soon face headwinds.
Two controversial legislative proposals under the Trump administration,
including a House-approved 3.5 per cent tax on remittances sent by non-citizens
and a draft bill proposing a 5% excise tax on all remittances by immigrant
workers, threaten to cut Kenya’s inflows by as much as $131 million (Sh16.9
billion) annually.
If enacted, the 3.5 per cent tax alone could result in an estimated annual
loss of $92.1 million (Sh12 billion) to Kenya, based on 2024 figures.
The higher 5 per cent tax could see losses of up to $131.46 million (Sh17
billion), significantly impacting families and our forex reserves.
Currently, remittance fees to Kenya average 6.4 per cent, already more than
double the United Nations target of 3 per cent.
The proposed taxes could raise the cost of sending money to 9.9–11.4 per
cent, pushing many Kenyans toward informal channels like hawala systems.
This shift would undermine financial transparency and cost the formal
financial sector an estimated $400 million (Sh41.7 billion) to $700 million (90.47
billion) annually.
The macroeconomic implications are also
significant. Diaspora remittances currently cover 147 per cent of Kenya’s
current account deficit.
In 2024 alone, remittance-driven foreign inflows contributed to a 14 per
cent appreciation of the Kenyan shilling.
At the household level, the stakes are even
higher.
About 63 per cent of remittances are used for basic needs, healthcare, and
education.
A decline in remittance volume or
value could reduce the purchasing power of over 250,000 Kenyan families by
15–20 per cent.
The proposed tax would likely hit ordinary
Kenyans hardest as it is not only about macro indicators but about school fees,
hospital bills, and daily survival.
Looking ahead, remittances are forecasted to rise steadily, reaching $5.6
billion (723.8 billion) by 2030 if current trends hold.
But experts caution that sustaining this growth will require not only
innovation but also strong global partnerships to shield Kenyan families from
geopolitically driven economic shocks.
