Remittances growth helps stabilise current account

Diaspora remittance inflows have increased by 10 percent in the eight months to August compared to the same period last year, helping stabilise the capital current account deficit.

Total inflows from Kenyans living abroad amounted to Sh211.38 billion in period compared to Sh191.85 billion recorded in the eight months to August in 2019, latest data by the Central Bank of Kenya (CBK) shows.

In August, the remittances amounted to $274.1 million (Sh29.67 billion) compared to $214.3 million (Sh21.75 billion) recorded in same month last year.

Month-on-month remittances, however, dropped by one percent, having stood at $277 million (Sh29.98 billion) in July.

“Remittance inflows remained strong in August amounting to $274.1 million compared to $214.3 million in August 2019, and $277 million in July 2020 in line with seasonal factors,” CBK stated in its weekly bulletin.

“Inflows from the US, United Kingdom, Saudi Arabia and Qatar increased, while those from South Africa and Germany declined marginally compared to July 2020.’’

The remittances have helped keep Kenya’s current account deficit at 4.7 per cent in the 12 months to August, a level similar to July after narrowing from five per cent in June. This bodes well for the shilling, which has been under pressure all year against the dollar, depreciating by seven percent since January.

The CBK also tied the stable current account to lower fuel import costs - which account for about 24 percent of total imports - due to lower global crude prices, improved exports of tea and horticulture.