Tourism inflows and diaspora remittances increased by 43 and seven per cent respectively in the year to May, offering crucial forex reserve support at a time import bill has been growing.
Latest data from Central Bank of Kenya (CBK) shows that tourism inflows rose to $1.02 billion (Sh106.3 billion) in the year to May 2017 from $714 million (Sh74.2 billion) a year earlier. This means tourism has replaced horticulture as the third largest foreign exchange earner for Kenya after diaspora remittances and tea.
Diaspora remittances rose to $1.75 billion (Sh181.9 billion) in the 12 months to May from $1.64 million (Sh170 billion) over a similar period last year, as horticulture and tea declined in the period.
“Our remittances were quite resilient, and there has been a recovery of travel receipts.
“We are getting higher tourist numbers with conference tourism, and also the composition of our tourism has changed because we are getting higher returns per tourist,” said CBK governor Patrick Njoroge during the Monetary Policy Committee press conference on Tuesday.
The inflows have offered support to the current account at a time imports of capital goods and food have shot up.
The current account balance widened to 6.2 per cent at the end of May from six per cent end of March, with the country importing more cereals and sugar due to drought and reduced sugar production respectively.
There was also an increase in import of transport equipment and machinery in the period between September 2016 and March, mainly the rolling stock for the standard gauge railway project.
The Central Bank’s projection, however, remains that the deficit will narrow by the end of the year — to about 5.7 per cent — due to a fall in capital imports and improving tea prices.
“The current account deficit is expected to narrow in the second half of 2017 in part due to resilient tea and horticulture exports, stronger diaspora remittances, and continued recovery in tourism,” said the regulator in the Monetary Policy Committee press release.
A stable exchange rate of the shilling would also help keep the deficit from widening further, given that Kenya is a net importer of goods.