Kenyans living and working abroad utilized the DhowCSD platform to invest in local bonds, resulting in the highest remittance inflow ever recorded in January. According to recent data from the Central Bank of Kenya (CBK), remittances surged to $412.4 million (Sh60.15 billion) in January 2024, marking a significant increase from $372.6 million (Sh54.3 billion) in December 2023, representing a 10.7 percent rise. This figure also reflects an 18 percent surge compared to the same period the previous year.
The surge in remittances is largely attributed to Kenyans in the diaspora participating in the local bond market through the DhowCSD platform, initiated by President William Ruto in September the prior year. This platform streamlined the process of opening trading accounts, reducing the setup time from 14 days to mere minutes and subsequently attracting a growing number of accounts within a short span.
A recent report from the CBK revealed that a local infrastructure bond aiming to raise Sh70 billion attracted bids worth Sh288.6 billion, with the government accepting Sh240.9 billion. Diaspora Kenyans’ involvement in these transactions significantly contributed to the record-high remittance inflows observed in January.
Despite the CBK not specifying the reasons for the increased remittances, experts attribute it to the growing participation of Kenyans abroad in the local bond market. The United States remained the largest source of remittances, constituting 54 percent of the total in January.
The surge in remittances coincided with the weakening of the Kenyan shilling, which crossed the 160 mark against the US dollar, potentially incentivizing more remittances. However, the shilling has since strengthened against the dollar, partly due to the issuance of a $1.5 billion Eurobond to retire the inaugural one due in June 2024.
In addition to remittances, Kenya received financial support from the International Monetary Fund (IMF) and the Trade Development Bank (TDB), bolstering forex reserves and alleviating pressure on the dollar from importers. The cumulative inflows for the 12 months ending January 2024 totaled Sh620.3 billion, a 5.3 percent increase from the same period in 2023.
Although the forex reserves slightly fell short of the statutory requirement of four months of import cover, the CBK remains optimistic about maintaining adequate reserves to mitigate external shocks. Reserves play a crucial role in safeguarding the country’s economy against potential vulnerabilities.
