Data from CBK shows that diaspora remittances fell for a second straight month to USD 214 million in August, which was a 4.5 percent decline from USD 224 million recorded in July.
However, the 12-month cumulative inflows to August 2019 increased to USD 2,776 million from USD 2,550 million in the 12 months to August 2018, reflecting a growth of 8.9 percent.
Diaspora remittances account for the largest share of Kenya’s foreign inflows. North America, Europe, and the rest of the world accounted for 52, 20, and 28 percent respectively of the total remittances in August 2019.
Tax amnesty
In June, Treasury had asked Kenyans holding wealth abroad to repatriate it back and enjoy a tax amnesty leading to $295 million (Sh30.3B) remittances in the month.
Remittances have been on a decline in July and August due to the expiry of a tax amnesty as any money repatriated into the country attracts a 10% tax from July 1.
Shilling weakening
Foreign reserves declined last week on low diaspora remittances to USD 9148 million (5.72 months of import cover) as of September 19.
The declining reserves risk exposing the shilling to short-term shocks in the foreign exchange market.
Furthermore, the shilling is facing pressure from demonetization as Kenyans rush to exchange the old 1000 note thus raising liquidity in the market as there is an expectation for the high demand for dollars
CBK weekly bulletin showed the shilling remained relatively stable exchanging at Sh103.91 per USD on September 19 compared to Sh103.78 on September 12.
