Kenyans working and living abroad sent home a record Sh104 billion in the sixty days between June and July this year, new official data shows.
This has seen their families benefit from the strong dollar and the strengthening of other major foreign currencies such as the British Pound and euro.
The shilling weakened by 19.5 per cent in the year to July against the dollar and exchanged at an average of 144.1824 on Friday, according to the Central Bank of Kenya (CBK) – a new record low.
But several large banks are now selling the dollar at up to Sh150, with bankers and forex bureaus saying the higher prices have been driven by demand and the cost of accessing the hard currency.
The rush to take advantage of a strong dollar by Kenyans in the diaspora is therefore stretching and boosting the purchasing power of their local beneficiaries amid the slump in the shilling, in turn triggering a remittance boom.
Latest data from CBK shows remittances surged to Sh54 billion last month alone, up from Sh49 billion in June.
“Remittance inflows in July 2023 hit a record monthly high of $378.1 million compared to $319.4 million in July 2022, an 18.4 per cent increase,” said the CBK.
The cumulative inflows for the 12 months to July 2023 totalled $4,076 million compared to $3,995 million in the same period in 2022, an increase of two per cent, the CBK added.
The record remittances indicate how Kenyans in the diaspora are defying global economic headwinds to help their families survive a ballooning cost of living.
A weakening shilling is causing pain to importers and consumers across the country, hindering the government’s efforts to rein in the stubborn cost of living.
Kenyans are forking out more to purchase basic commodities as the shilling continues to weaken due to external pressures, posing a fresh political and economic headache for the Kenya Kwanza administration.
Restless Kenyans want the Ruto administration to put measures in place to shield consumers and companies from the full impact of surging energy and food costs.
The rise in diaspora remittances defies varied projections that the remittances by Kenyans would drop in the face of rising global prices, which has adversely affected migrants’ real incomes and piled pressure on the budgets.
CBK data shows Kenyans working in the US remain the largest contributors to the remittances, sending more than half of all the contributions.
“The US remains the largest source of remittances into Kenya, accounting for 55 per cent in July,” said CBK.
It said the record remittances are helping shore up the country’s foreign currency reserves, which have come under pressure in recent months. “The strong remittances inflows continue to support the current account and the stability of the exchange rate,” said the CBK.
Remittances are a vital source of household income for Kenya.
According to the World Bank, they alleviate poverty, improve nutritional outcomes, and are associated with increased birth weight and higher school enrollment rates for children in disadvantaged households.
Studies show that remittances help recipient households to build resilience, for example through financing better housing and to cope with the losses in the aftermath of disasters.
“Remittances lift people out of poverty, put food on the table, pay for education, cover health expenses, allow housing investments and many other family goals beyond consumption,” said the president of the International Fund for Agricultural Development (IFAD) Gilbert Houngbo at a past event marking the International Day of Family Remittances.
Remittance flows to developing regions such as Kenya are being shaped by several factors, according to the World Bank.
A reopening of host economies as Covid-19 receded supported migrants’ employment and their ability to continue helping their families back home.
Rising prices, on the other hand, adversely affected migrants’ real incomes.
“Migrants help to ease tight labour markets in host countries while supporting their families through remittances. Inclusive social protection policies have helped workers weather the income and employment uncertainties created by the Covid-19 pandemic,” said World Bank Global Director for Social Protection and Jobs Michal Rutkowski earlier.