Kenyans living abroad have become a crucial pillar of Kenya’s economic stability, making significant contributions to the country’s financial well-being.
In 2023, remittances from Kenyans overseas reached an unprecedented milestone, surging to a record high of Sh671 billion ($4.19 billion). This remarkable figure represents a four per cent increase compared to the previous year, as reported by the Central Bank of Kenya.
A notable driver of this growth was the remarkable increase in diaspora receipts from within Africa, which witnessed a more than 50 per cent year-on-year surge in the 12 months leading up to November 2023.
The United States maintained its status as the largest source of diaspora remittances, contributing 56 per cent to the record-breaking figure, reflecting a one per cent increase from the previous year.
Top sources of remittances also included Canada, the United Kingdom, Germany, Saudi Arabia, the United Arab Emirates, and Australia.
Diaspora remittances, along with tourism receipts, play a crucial role in offsetting the impact of declining export revenue on the country’s current account balance, as acknowledged by the International Monetary Fund (IMF).
In its latest country report for Kenya, the IMF noted, “Tourism receipts exceeded pre-pandemic [Covid-19] levels and, together with robust remittances, supported the external balance.”
The sustained growth in diaspora remittances played a vital role in reducing the current account deficit to 4.1 per cent of the gross domestic product (GDP) in 2023, down from 5.2 per cent in 2022.
As traditional exports like tea, coffee, and horticulture faced challenges due to subdued global demand, diaspora remittances emerged as a beacon of economic stability.
IMF executive director Willie Nakunyada highlighted the shifting dynamics, stating, “The traditional exports of tea, coffee, and horticulture underperformed in line with subdued global demand.”
Looking ahead, the IMF anticipates continued growth in diaspora remittances over the medium term, playing a crucial role in sustaining the positive trajectory of the country’s current account balance. This positive outlook aligns with expectations of a rebound in exports and persistent growth in tourism receipts beyond pre-pandemic levels.
