This archive report was first published on 25 September 2019.
Published on September 25, 2019, data from the Central Bank of Kenya shows that diaspora remittances fell for a second straight month to USD 214 million in August, a 4.5 percent decline from USD 224 million recorded in July.
Despite the decline, the 12-month cumulative inflows to August 2019 increased to USD 2,776 million from USD 2,550 million in the 12 months to August 2018, reflecting a growth of 8.9 percent.
Remittances from the diaspora account for the largest share of Kenya's foreign inflows, with North America, Europe, and the rest of the world accounting for 52, 20, and 28 percent respectively of the total remittances in August 2019.
The decline in remittances is attributed to the expiry of a tax amnesty, which led to a surge in remittances in June, with USD 295 million (KSh30.3B) repatriated into the country.
However, with the tax amnesty expiring, any money repatriated into the country now attracts a 10% tax, leading to a decline in remittances.
The decline in diaspora remittances has also led to a decline in foreign reserves, which fell to USD 9148 million (5.72 months of import cover) as of September 19.
The weakening of the shilling is also a concern, as it risks exposing the currency to short-term shocks in the foreign exchange market.
Furthermore, the shilling is facing pressure from demonetization, as Kenyans rush to exchange the old 1000 note, raising liquidity in the market and increasing demand for dollars.
Despite this, the shilling remained relatively stable, exchanging at Sh103.91 per USD on September 19 compared to Sh103.78 on September 12, according to the Central Bank of Kenya's weekly bulletin.
