Recent data from the Central Bank of Kenya shows Kenyans living and working in the diaspora sent Sh55.5 billion in January, an amount that declined from the previous month’s Sh57.9 billion.
However, in comparison to January 2024’s contributions of Sh. 53.6 billion, the amount was a 3.54 pc increase.
CBK failed to give reasons for the drastic drop in remittances. Financial experts foresee a continued drop in the coming months, attributing it to US President Trump’s strict immigration policies and funding restrictions.
In the 12 months leading up to January 2025, the total remittances rose by 16.6 pc to Sh639 billion, up from Sh546 billion.
“The remittance inflows continue to support the current account and the foreign exchange market. The US remains the largest source of remittances to Kenya accounting for 53.2% in January 2025.”
Kenya’s Forex reserves remained strong at Sh1.2 billion as of February 13th, offering 4.8 months of import cover. This complies with CBKs requirement to maintain at least four months’ worth of import cover.
Similarly, short-term government securities saw reduced investor interest in the week ending February 14th, as yields continued to decline. CBK data indicates that the government received 2,526 bids out of the 4,000 on offer, with returns slipping to 8.9 pc from 9.1 pc.
The decline in return rates has been a prevalent trend since November 2024. Financial analysts expect the trend to continue as banks comply with regulatory directives to lower lending rates.
In response, several banks, including Cooperative Bank, decreased their average lending rates from 5 pc to 3 pc to inject more liquidity into the economy.
“Banks, which account for over half of the amount invested in state securities are expected to hawk loans to businesses and individuals, further hurting the performance of short-term government papers. Although long-term papers were oversubscribed, their returns are also shrinking,” said Money Market expert Geoffrey Lubinu.
