- Remittance inflows for March grew to $407.8 million, up from $385.9 million in February, with the US maintaining its lead as the top source for Kenya’s remittances.
- This was also higher by 14.2 percent compared to the $357.0 million sent in the same month last year (March 2023), according to official data by the Central Bank of Kenya (CBK).
- The cumulative inflows for the 12 months to March 2024 totaled $4.4 billion compared to USD 4 billion in a similar period in 2023, an increase of 10 percent.
Kenyans living and working abroad sent home more money in March, boosting the country’s forex reserves and supporting families and friends.
Remittance inflows for March grew to $407.8 million, up from $385.9 million in February, with the US maintaining its lead as the top source for Kenya’s remittances.
This was also higher by 14.2 per cent compared to the $357.0 million sent in the same month last year (March 2023), according to official data from the Central Bank of Kenya (CBK).
The cumulative inflows for the 12 months to March 2024 totalled USD4.4 billion compared to $4 billion in a similar period in 2023, an increase of 10 per cent.
“The US remained the largest source of remittances to Kenya, accounting for 56 per cent in March 2024,” CBK said in its latest report.
The stable inflows have seen the country continue to maintain strong foreign exchange reserves, which are also supported by export earnings and loan disbursement, easing pressure on the government, which was in February forced to float a $1.5billion new Eurobond, pay off part of the $2 billion Eurobond maturing in June this year (2024).
The new Eurobond issuance is priced at 10.375 per cent and is due in 2031. The bond will be repaid in three instalments beginning in 2029, 2030 and 2031, resulting in a weighted average life of six years.
As of Friday, the country’s usable foreign exchange reserves stood at $7.3 billion, which is about 3.8 months of import cover.
“This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover,” CBK said in its weekly bulletin.
The reserves also play a crucial role in helping stabilise the shilling, which remained stable against major international and regional currencies during the week ending April 11.
It exchanged at Ksh130.39 per US dollar on April 11, compared to Ksh131.17 per US dollar the previous week, having gained from the Ksh160 it had hit earlier in the year.
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Primary uses of remittance inflows
The number of Kenyans in the diaspora has significantly increased and is estimated to be four million, according to the Ministry of Labour, with the US leading, followed by the UK and countries in the Middle East such as Saudi Arabia and UAE.
Diaspora remittances are currently the biggest foreign exchange earner for East Africa’s largest economy, having overtaken earnings from tea, coffee and tourism.
Major uses of remittances include education, healthcare, and household expenses, according to an analysis by global payment firm World Remit.
The high cost of education and healthcare has continued to eat into households’ budgets despite easing inflation in countries like Kenya.
Those with families and friends abroad are seen to count on them to help meet their daily needs amid low disposable income and job cuts.
Families in Morocco, Cameroon, Ghana, Guatemala, and Kenya are projected to spend more than the average monthly income on education this year.
“During crises, migrants have weathered risks and shown resilience to support families back home. But high inflation and subdued global growth are affecting how much money they can send,” said Iffath Sharif, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
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Monetary policies and taming inflation
To manage inflation, stabilize the shilling, and cushion the country from global shocks, the Central Bank of Kenya has made several policy interventions this year, raising the base lending rate.
The Monetary Policy Committee (MPC), CBK’s top decision-making organ, met on April 3, 2024, against an improved global outlook for growth and inflation despite persistent geopolitical tensions.
The MPC reviewed the outcomes of its previous decisions and measures implemented to anchor inflationary expectations and contain exchange rate pressures.
According to CBK governor Kamau Thugge, global growth continues to recover, supported by stronger-than-expected growth in the United States and robust growth in some large emerging market economies, particularly India.
However, the main risks to global growth and inflation are related to the potential escalation of geopolitical tensions, particularly the Israel-Palestinian and Russia-Ukraine conflicts.
“Global inflation has moderated, but some stickiness has persisted in some advanced economies, driven by core inflation,” Thugge said.
Food inflation has declined with improved supply of key food items, particularly cereals and edible oils.
International oil prices, however, remain a key risk to inflation, where prices have trended upwards since January 2024, largely driven by disruptions to shipping through the Red Sea and production cuts by OPEC+ and other allied oil producers.
Kenya’s overall inflation declined further to 5.7 per cent in March 2024 from 6.3 per cent in February, driven by lower food and fuel inflation.
Food inflation declined to 5.8 per cent from 6.9 per cent in February, reflecting lower prices of some food items, particularly maize and wheat products, carrots, kales (sukuma wiki), spinach, and cabbages, following improved supply attributed to ongoing harvests and favourable weather conditions.
Fuel inflation declined to 12.3 per cent in March from 13.4 per cent in February, Kenya National Bureau of Statistics (KNBS) data indicates, largely reflecting the impact of the shilling’s appreciation, which resulted in a decrease in electricity prices and a downward adjustment in pump prices.
Non-food non-fuel (NFNF) inflation remained stable at 3.6 per cent in February and March.
“Overall inflation is expected to moderate further in the near term, supported by easing food and energy prices, pass-through effects of the recent exchange rate appreciation, and the impact of monetary policy actions which continue to filter through the economy,” Thugge said.
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Economic growth
Meanwhile, leading indicators point to the continued strong performance of the Kenyan economy in the first quarter of 2024, reflecting robust activity in the agriculture and service sectors, particularly accommodation and food services and information and communication.
The economy is expected to remain strong in 2024, supported by the resilient services sector, robust performance of the agriculture sector and continued implementation of government measures to boost economic activity across priority sectors.
The March 2024 Agriculture Sector Survey shows that respondents expect inflation to decrease in the next three months because of lower food prices in line with the expected favourable weather conditions, the appreciation of the exchange rate, and the reduction in fuel prices.
The CEOs Survey and Market Perceptions Survey, conducted before the MPC meeting, revealed increased optimism about business activity and economic growth prospects for the next 12 months.
“The stronger optimism was attributed to enhanced agricultural performance on account of favourable weather and government interventions in the sector, easing inflation, strengthening of the Kenya shilling and a resilient private sector,” CBK said.
Nonetheless, respondents remained concerned about taxation, high-interest rates, and geopolitical risks.
CBK, however, maintains that ongoing measures have lowered inflation, addressed the exchange rate pressures and anchored inflationary expectations.
The MPC further noted that overall inflation is expected to decline soon, supported by lower food and fuel prices and pass-through effects of the recent exchange rate appreciation.
Therefore, the MPC concluded that the current monetary policy stance would ensure that overall inflation continues to decline towards the five per cent mid-point of the target range, and thus decided to retain the Central Bank Rate (CBR) at 13 per cent.
“The MPC will closely monitor the impact of the policy measures as well as developments in the global and domestic economy and stands ready to take further action as necessary in line with its mandate,” said Thugge.
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