Kenya's Diaspora Remittances Soar to a Record Sh 56.2 Bn In October.
Kenyan diaspora remittances hit a new monthly record of $437.2 million (Sh56.2 billion) in October 2024, driven primarily by increased flows from regions outside the US and Europe, with daily remittances averaging Sh1.81 billion.
The cumulative 10-month remittances reached $4.08 billion (Sh527.92 billion), representing a 17.7% growth from last year's $3.46 billion, with remittances from the rest of the world increasing by 12.6% to $117.88 million, while North America, which accounts for 56.7% of total remittances, grew by 1.9% to $247.9 million.
This growth has exceeded the Central Bank of Kenya's projections, which were revised upward three times this year to 16%, underlining the increasing importance of diaspora remittances as Kenya's largest source of foreign cash flows since 2015, surpassing tourism, foreign direct investments, and key agricultural exports.
The trend reflects the significant contribution of Kenya's international migrant population, with the US hosting the largest number (157,000) followed by the United Kingdom (139,000), while remittances have averaged $3.56 billion annually over the past five years.
Elsewhere, The Kenyan Treasury is targeting an additional Sh343 billion in tax revenue for the next financial year, aiming to collect Sh2.732 trillion, a 14.4% increase from the current year's target of Sh2.389 trillion, potentially risking fresh social unrest.
This ambitious target comes after President William Ruto was forced to withdraw the Finance Bill 2024 in June following widespread protests, which had proposed new taxes to raise an extra Sh346 billion, leading to cabinet dissolution and budget adjustments that concerned the International Monetary Fund.
The Treasury plans to achieve these targets through various measures outlined in the budget review and outlook paper (BROP), including new taxes, aggressive pursuit of tax evaders, and expansion into informal sectors.
Specific targets include an 11.9% increase in income tax to Sh1.32 trillion, 13.3% increase in VAT to Sh820.3 billion, 20% increase in excise duty to Sh389.6 billion, and 25.8% increase in import duty to Sh201.3 billion.
The government is already implementing some measures through the Tax Laws Amendments Bill, including higher taxes on betting, phone calls, and data, while also integrating KRA systems with banks and payment service providers to enhance tax collection.
This aggressive pursuit of increased revenue, echoing past strategies like the 1990s tax reforms under President Moi, could stifle economic growth and exacerbate social inequalities.
While the focus on broadening the tax base by incorporating the informal sector aligns with long-standing recommendations from institutions like the IMF, the potential for social unrest necessitates a cautious approach.
Treasury must prioritize equitable tax policies and transparent revenue management to mitigate the risk of further protests and ensure long-term economic stability.