Diaspora cash tops Kenya’s foreign exchange earnings

The money workers send home to their families from abroad has become a critical part of Kenya’s economy, President Uhuru Kenyatta said yesterday. Based on the most recent data, remittances, as this money is called, have over the years grown in importance.

In his Jamhuri Day Speech, the president noted that money sent in by Kenyans living abroad has since overtaken coffee and tea to become the country’s main foreign exchange earner.

The flow of money into the country from Kenyans living and working abroad surged to an all-time high of $295 million (Sh30.3 billion) in June, before it began a descend in the subsequent months.

The head of State attributed this to improvement on the country’s human capital, which he noted, had not only driven the Kenyan society and economy, but also those of other nations.

“Our highly-educated citizens are much sought after all over the globe. To signify the changing fortunes of our homeland, diaspora remittances grew by 10.9 per cent from Sh266.19 billion to Sh295.32 billion between June 2018 and June 2019, overtaking earnings from export of tea and coffee as the country’s largest source of foreign exchange,” said Kenyatta yesterday.

However, some experts have been attributed the surge to the changes in the law. This is because the record-breaking remittance inflows coincided with the lapse of the June-30 deadline for the return of taxable money stashed outside the country.

The significant reading in June is an indicator that there might have been a rush to beat the deadline given by embattled National Treasury Cabinet Secretary Henry Rotich in his 2018/19 budget statement on any taxable cash in foreign countries.

The last time the monthly increases in remittance inflows hit a record high was in February 2009 when money from abroad jumped by 34.9 per cent to $53.3 million (Sh5.4 billion in current exchange rates) from $3.9 million (Sh4.03 billion) in January of that year.

Increased diaspora remittances have helped shore up the shilling at a time when the country’s export earnings have been sluggish.

Cytonn, an investment management company, said in October last year note attributed the rise in diaspora remittances to individuals who continued to take advantage of the tax amnesty granted on foreign income.

In 2016, the Tax Procedures Act was amended to provide a tax amnesty on income declared for the year by a person who earned taxable income outside Kenya.

CS Rotich extended the period for applying the amnesty from December 30, 2017, to June 30, 2018, but the uptake remained low still. Mr Kenyatta said Kenya boasts the highest rate of primary-to-secondary school transition, with nearly every pupil who sits for the Kenya Certificate of Primary Education proceeding to the next level.

“When our learners sit down to acquire knowledge and discover their full potential, they do so guided by a new Competence-Based-Curriculum that extensively utilizes digital learning platforms fit for the learning practices and demands of the 21st Century,” he said.

However, the country’s exports have not been doing so well, with earnings from tea and coffee remaining stagnant.