Foreign currency deposits held in banks rose by Sh60 billion in June continuing a trend analysts said was driven by higher diaspora remittances and locals taking advantage of a tax amnesty on foreign-held assets.
Data published by the Kenya National Bureau of Statistics (KNBS) shows the amount rose to Sh574.7 billion by the end of June, from Sh514 billion in May — which was the first time the holdings had crossed the Sh500 billion mark.
Year on year, the deposits have gone up by 28 per cent having stood at Sh450.6 billion in June 2017. Some tier three banks told analysts that they had seen higher inflows as the deadline for the amnesty approached towards the end of the second quarter.
The Treasury had placed a deadline of June 30, for the tax pardon — meant to encourage fat cats holding undeclared assets overseas to bring them home — but in the budget for 2018/2019 the CS Henry Rotich extended it by a further one year to encourage more of them to take up the offer.
He has also relaxed the scrutiny on how the assets were accumulated to encourage compliance with the reprieve that does not cover proceeds of corruption.
The Central Bank of Kenya cited healthy diaspora remittances as the main cause of the increase, especially from those looking to make investments back home.
“Banks have introduced new products targeting the diaspora, which have been very effective…the diaspora have also responded favourably and consequently the numbers in remittances have been much higher,” said CBK governor Patrick Njoroge during the last Monetary Policy Committee briefing at the end of July.
CBK data on diaspora remittances shows they hit a monthly record of Sh26.8 billion ($266.2 million) in June.
Cumulatively for the first six months of the year, the remittances stood at Sh138.4 billion ($1.378 billion), a 55.3 per cent increase over the same period in 2017 when they stood at Sh89.3 billion ($887.6 million).