By Rédaction Africa Links 24 with Daily Nation
Published on 2024-01-23 05:51:58
In 2023, Kenyans living abroad sent a record Sh671 billion ($4.19 billion) back home, significantly increasing the country’s current account balance despite a decline in export revenue. The Central Bank of Kenya reported a 4 percent increase in diaspora remittances from the previous year. Remittances from within Africa saw a more than 50 percent year-on-year increase, contributing to the rise in overall remittances. The United States remained the largest source of remittances, accounting for 56 percent of the total amount, with other top sources being Canada, the United Kingdom, Germany, Saudi Arabia, the United Arab Emirates, and Australia.
A sustained growth in diaspora remittances and tourism receipts played a crucial role in reducing the current account deficit, according to the International Monetary Fund (IMF). The IMF estimated that the deficit dropped to 4.1 percent of the country’s GDP in 2023 from 5.2 percent in 2022 despite a decrease in demand for Kenyan exports. The IMF also predicted continued growth in diaspora remittances, which along with rebounding exports and growing tourism receipts, is expected to sustain the improvement in the current account deficit over the medium term.
The decline in exports of goods and services was attributed to subdued demand from traditional agricultural export markets and a sharp contraction in transportation services. The report highlighted tourism receipts, which exceeded pre-pandemic levels, and robust remittances as factors that supported the external balance. Diaspora remittances have now become a prominent source of foreign exchange for Kenya, surpassing traditional exports such as tea, coffee, and horticulture.
Overall, the sustained growth in diaspora remittances and tourism receipts has helped to offset the decline in export earnings, contributing to an improved current account balance for Kenya.
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