Foreign currency deposits held in Kenyan banks rose to an all-time high of Sh620.5 billion at the end of June, driven by diaspora remittances, horticulture exports and a lower import bill.
The rise above Sh600 billion — for the first time — also coincided with the end of the Treasury’s amnesty period for Kenyans who have stashed wealth abroad to return it home without facing prosecution or tax.
The increase in inflows and fall in imports has seen the country’s current account deficit narrow considerable in the past year, to 4.2 percent of gross domestic product (GDP) by end of June compared to 5.4 percent a year earlier.
This would in turn leave more hard currency in the hands of banks as importer demand for dollars goes down.
“The current account deficit narrowed in the 12 months to June 2019 supported by strong diaspora remittances, resilient performance of exports, higher receipts from tourism and transport services, and slower growth in imports,” said the Central Bank of Kenya (CBK) in a brief following the Monetary Policy Committee meeting last month.
The deposits first hit Sh500 billion in May last year as the original deadline of the repatriation amnesty approached in June 2018.
However, the amnesty was extended to June this year with the sweetener that those who brought in the money would not face prosecution under the Economic Crimes Act or money laundering laws.
Official remittances data by CBK shows that June 2019 recorded the highest ever monthly inflows at Sh30.4 billion ($295.3 million).
Cumulative flows for the 12 months to June 2019 rose by 13.6 percent to Sh285.4 billion from Sh251.4 billion in the same period the previous year.