Kenya’s diaspora remittances fall Sh9bn amid global economic shocks

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Kenya’s diaspora remittances fell by Sh9 billion to Sh368.75 billion in the first seven months of the year, raising the prospects of the first annual decline in 17 years as global inflation continues to affect flows from key source markets.

The last recorded full-year decline in diaspora remittances was in 2009, when the volumes settled at $609 million, from $611 million in 2008.

Since then, a majority of years have seen double-digit growth in percentage terms, elevating remittances to become Kenya’s top foreign exchange earner ahead of tourism receipts, tea and horticulture exports. The cash is also key to the country’s current account, which measures the balance between forex inflows and outflows.

In 2025, diaspora flows grew by 1.9 percent to a record $5.04 billion (Sh652.3 billion), which was, however, a slower pace of expansion from 18 percent in 2024.

The war in Iran that started in February has, however, halted growth this year due to the inflationary effect of higher global prices on the disposable income of Kenyans living in key source markets in Europe and North America,

In the Middle East, the conflict has had a direct impact on economic activities, affecting thousands of labour migrants from Kenya. Saudi Arabia flows have also been hit by tougher labour laws that have made it harder for Kenyan workers to take up jobs in the oil-rich country.

The geopolitical challenges have now forced the Central Bank of Kenya (CBK) to cut its projection of full-year remittances by Sh49.6 billion ($383 million).

At the beginning of the year, the CBK had projected 2026 inflows at $5.42 billion (Sh701.9 billion), or six percent growth year-on-year, but it has now cut this to $5.07 billion (Sh657 billion), which, if achieved, will represent an annual expansion of just 0.7 percent.

“We had a contraction of 2.4 percent in the 12-months to June 2026. Presuming a de-escalation in the Middle East, we expect an improvement in the second half of the year, so our projection of inflows is an increase of 0.7 percent, which would, however, be the slowest growth we have had in many years,” said CBK governor Kamau Thugge on August 12.

“We have had to revise this projection downwards given the performance of remittances so far in the 12-months to June, and also in the first six months of this year, we felt it wise to revise it downwards.”

In July, inflows stood at $436.58 million (Sh56.5 billion), up from $375.6 million (Sh48.6 billion) in June. Despite this month-on-month improvement, the overall flows this year remained below last year.

Before the war in Iran, the CBK had identified the changing labour landscape in Saudi Arabia as the biggest threat to growth of Kenyan diaspora dollars, with the Gulf country having risen to second place in the list of top source markets behind the US.

Saudi Arabia started enforcing value-added tax on services last year, requiring money transfer platforms to charge and remit tax on transaction costs at a rate of 15 percent, effectively raising the cost of sending money to countries such as Kenya.

The country also put in place sweeping labour market reforms which disrupted wages, contract renewals and onboarding schedules for thousands of Kenyan workers, affecting their remittance behaviour and volumes.

Starting June 2025, Saudi Arabia introduced a skill-based work-permit framework which replaced the decades-old one-size-fits-all iqama system under which all foreign workers held the same residency and permit category, regardless of profession, education level or experience.

Under the new framework, foreign workers have been grouped into three categories (highly skilled, skilled and basic) that are based on academic qualification, experience, technical skills, wage bracket and age.

The top tier captures workers such as doctors, engineers and corporate executives, who are also required to have at least a bachelor’s degree and five years’ experience, while the skilled tier covers technicians, mid-level supervisors and craftsmen who are required to have vocational or secondary level education and two years’ experience.

The majority of Kenyan workers in the country, however, fall in the basic tier, which houses entry-level and manual roles that do not carry a formal education requirement, but are age-capped at 60 years.

Reporting originally appeared via Nation Africa. Read the full source for additional context.