Cash sent home by Kenyans living abroad rose by 4.1 per cent in the first half of the year to $887.6 million (Sh91.6 billion) compared to a similar period last year, helping support the shilling against major global currencies.
Latest Central Bank of Kenya (CBK) data shows that the remittances rose markedly in the second quarter of this year compared to the first, peaking at an all-time monthly high of $161.5 million (Sh16.6 billion) in May.
CBK Governor Patrick Njoroge said in a briefing after the last monetary policy committee meeting in July that the higher diaspora remittances, tourism earnings and agriculture exports will help the country narrow its current account deficit by the end of the year, in spite of rising imports.
“Our remittances are quite resilient, as are inflows from tea, horticulture and tourism,” said Dr Njoroge.
Remittances are Kenya’s largest source of foreign exchange, ahead of tea, horticulture and tourism.
The year-on-year growth in remittances has, however, slowed down this year compared to 2016.
Last year they stood at $852.5 million in the six months to June, having gone up by 13 per cent from the $753.7 million sent home in a similar period in 2015.
Volatility
The healthy inflows have provided a buffer for the shilling this year, giving the CBK enough firepower to counter exchange rate volatility through sale of dollars into the market.
The shilling has depreciated by 0.5 per cent to the dollar since the beginning of the year.
The CBK currently maintains forex reserves worth $7.49 billion worth 4.97 months of import cover, which is higher than the required four months cover.
A narrower current account deficit will also be key in easing pressure on the exchange rate.
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 production.
The first half of the year also saw imports of transport machinery go up, mainly the rolling stock of the standard gauge railway.
The Central Bank’s projection, however, remains that the deficit will narrow by the end of the year to about 5.7 per cent.
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Credit: Business Daily
