Money sent home by Kenyans living abroad continued on a growth trajectory to hit a record Sh671 billion ($4.19 billion) in 2023, significantly boosting the country’s current account balance amid falling export revenue.
Data from the Central Bank of Kenya shows that diaspora remittances in the 12 months to December 2023 increased by 4 percent from the $4.028 (Sh645 billion at current exchange rates) recorded in a similar period in 2022.
The rise in remittances was largely driven by growth in diaspora receipts from within Africa, which increased by more than 50 percent year-on-year in the 12 months to November 2023.
The United States remained the largest source of diaspora remittances last year, accounting for 56 percent of the remittances, a one percent increase from the $2.33 billion posted in 2022.
Other top sources of remittances were Canada, the United Kingdom, Germany, Saudi Arabia, the United Arab Emirates, and Australia.
In its latest country report for Kenya, the International Monetary Fund said this sustained growth of diaspora remittances, along with tourism receipts, was crucial to reducing the current account deficit last year as earnings from exports reduced.
Current account balance is the difference between payments received by Kenyans from foreigners and those made by Kenyans to residents of other countries in foreign currencies.
“Exports of goods and services have slowed as the demand from traditional agricultural export markets was subdued and transportation services saw a sharp contraction,” the lender said in its report assessing Kenya’s economic performance.
“Tourism receipts exceeded pre-pandemic [Covid-19] levels and together with robust remittances supported external balance.”
IMF estimates that the country’s current account deficit slimmed to 4.1 percent of gross domestic product (GDP) in 2023, from the 5.2 percent recorded in 2022, a significant improvement in a tight economic environment characterised by a drop in demand for Kenyan exports.
Over the medium term, the multilateral lender expects diaspora remittances to continue growing, sustaining the improvement in the country’s current account deficit, as exports also rebound and tourism receipts continue to grow beyond the pre-pandemic levels.
Exports such as coffee, tea, and horticulture have traditionally been the largest earners of foreign exchange for Kenya, but diaspora remittances have lately emerged to be the most prominent, bringing in more than the three exports combined.
“The traditional exports of tea, coffee, and horticulture underperformed in line with subdued global demand,” said IMF executive director Willie Nakunyada in a statement on Kenya’s economic performance.