Markets & Finance

Diaspora remittances hit record Sh15.6bn in June, lifting forex

cbk

The Central Bank of Kenya building on Haile Selassie Avenue in Nairobi. PHOTO | FILE

Kenyans working abroad increased the money they sent back to the country by 6.3 per cent last month compared to the previous month.

According to the latest data from the Central Bank of Kenya (CBK) diaspora remittances hit a record Sh15.6 billion in June up from Shh14.6 billion in May.

Higher diaspora remittances help narrow the country’s balance of payments deficit thereby supporting the local currency. Remittances are the single largest contributor to foreign exchange ahead of major exports such as tea.

Analysts say money from abroad will be crucial in cushioning the shilling from dollar pressures currently being driven by demand for payment of month-end import bills.

“Pressure will remain on the Kenya shilling although increasing remittance inflows and a reduced import bill helped by low energy prices will help to support the currency,” Ecobank Research said in this week’s report on currencies.

The rise in remittances came as a relief especially because there were fears that the British vote to leave the European Union would eat into the value of money sent back to Kenya.

After the Brexit vote, the pound hit a 31-year low of 1.2796 against the greenback. The euro has also depreciated even though not as much as the pound.

The CBK noted that the money sent by Kenyans living in America and the rest of the world, which combined accounted for 72.1 per cent of total remittances, rose last month to support thinning inflows from Europe.

“The sustained upward trend in part reflects the entry of additional money remittance providers into the market,” the CBK said.

Remittance inflows from North America increased by Sh831 million or 11.9 per cent and accounted for 49.3 per cent (Sh7.79 billion) of total inflows in June while inflows from the rest of the world increased by 13 per cent.

Inflows from Europe decreased by 6.3 per cent and accounted for 28 per cent of total inflows or Sh4.3 billion. In May, remittances from Europe had shot up by Sh600 million or 14.8 per cent from April but this has now drastically reversed.

June’s figures have also pushed up the average amount of money sent by Kenyans abroad to Sh13.9 billion up from Sh12.4 billion.

Cumulative inflows in the 12 months to June 2016 increased by 11 per cent to Sh162 billion from Sh141 billion in the year to June 2015.