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Diaspora remittances drop by Sh1.5 billion on US slowdown

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Kenya’s diaspora remittances have continued to grow with projections indicating a new record high for 2023. FILE PHOTO | POOL

The slowdown in the US economy has opened an Sh1.5 billion hole in the flow of remittances into Kenya in the first half of the year.

Fresh data from the Central Bank of Kenya (CBK) shows total diaspora remittances fell by 0.5 percent to Sh287.7 billion ($2.033 billion) in six months to June from Sh289.2 billion ($2.044 billion) a year earlier.

Read: Diaspora remittances defy inflation hit Sh453bn

Inflows from the US that represented 54 percent of the cash fell by 3.8 percent in the period to Sh163.1 billion ($1.153 billion) from Sh169.6 billion ($1.198 billion), contributing to the biggest nominal dip.

The fall of the diaspora cash from the US has coincided with the tightening of monetary policy by the US Federal Reserve as part of measures combating inflation that has resulted in a tight economic cycle which had seen many economists in the country preempting the probability of a recession.

Remittances from Australia and the Oceania region have also fallen by 28.2 percent in the same reference period to Sh6.1 billion ($43.4 million).

Inflows from other regions have nevertheless shown resilience with remittances from Europe, Asia and Africa growing by 1.7 percent, 4.9 and 34.8 percent respectively.

Diaspora remittances from the UK and Saudi Arabia grew by 6.8 and 31.8 percent in that order to Sh23.9 billion and Sh26 billion.

Meanwhile, Uganda has remained the fastest-growing source market for remittances which grew by 99.5 percent in the six-month period to Sh4 billion.

South Africa has, however, bucked the trend of remittance growth on the continent with inflows from the country contracting by 55.2 percent to Sh747.7 million.

Diaspora remittances remain a key source of forex and make for the largest source of hard currency into Kenya behind only foreign direct investments.

The CBK notes the inflows have remained critical to supporting the exchange rate.

“The remittance inflows continue to support the current account and the foreign exchange market,” the CBK noted.

Last month, CBK Governor Kamau Thugge noted the impact of the US economy on the remittances even as he expected the diaspora dollars to once again show resilience.

Read: Money from Kenyans abroad dips for first time in 13 years

“About 57 percent of remittances come from the United States. The slowdown in the US economy may be part of the story explaining why there is a flattening of the diaspora remittances,” he noted.

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Editor's Note: The story has been revised to correct the contraction in remittances for the period to June to Sh1.5 billion instead of Sh8.6 billion as earlier indicated.