Kenya is staring at a potential cut on the amount of money sent back home by those working in the US in the wake of a proposal to tax remittances.
A section of Republican lawmakers in the US House of Representatives have introduced a draft bill that seeks to impose a five per cent excise tax on all remittances sent home by migrants, including green card holders and non–immigrant visa holders, with an exemption of US citizens.
If passed, the proposal included in President Donald Trump’s “big, beautiful bill”, a major budget package aimed at addressing the president’s defence, energy and tax priorities, will impact the more than 47.8 million immigrants, where Kenyans are estimated to be about 164,600.
House Republicans are reported to be keen to pass the massive bill full of Trump’s top agenda items by end of next week.
With the US being the leading source of remittances to Kenya, households are likely to be hard hit as costs of sending money will go up, with some migrants expected to cut on the amount they send home.
For instance someone sending home $500 (about Sh64,650) will pay about Sh3,250 as excise tax on the proposed five per cent.
This is on top of $41.85 (Sh5,301) which is the cost of sending, pegged on the average 8.37 per cent of the total transaction value which is the average cost of sending remittances to Africa, according to recent data from the World Bank which it says remains high.
A drop in remittances is likely to impact households’ education, healthcare and basic needs, the main uses of remittances in Kenya as per recent analysis by WorldRemit.
It is also expected to impact the country’s forex reserves and ultimately the Kenyan shilling, as US remains the country’s biggest source of diaspora remittances which are the country’s primary sources of foreign exchange earnings, followed by tourism receipts and exports of horticulture products, tea, and coffee.
“It raises the cost of transfers and could actually dissuade sending the cash to Kenya. Notably, remittances are rivaling exports, so that would have significant implications on our forex account at a time when the country desperately needs a stable forex account to settle external debts and have sufficient import cover,” public finance expert and Bajeti Hub executive director, Abraham Rugo, told the Star.
According to the Central Bank of Kenya, Kenyans living and working abroad sent home a record $4.94 billion (Sh638.5 billion- current exchange rate) in the year ended December 2024, compared to $4.18 billion (Sh540.3 billion) in 2023, a record-high that shattered its initial forecast of Sh600 billion.
These inflows have helped stabilise the shilling, which hit a low of Sh160 to the dollar last year, before stabilising at Sh129.
“The Kenya shilling remained stable against major international and regional currencies during the week ending May 8, 2025. It exchanged at Sh129.27 per US dollar on May 8, compared to Sh129.34 per US dollar on April 30,” CBK says in its weekly bulletin.
Usable foreign exchange reserves remained adequate at $10.29 billion (Sh1.33 trillion), which is 4.6 months of import cover as of May 8, 2025, which meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover.
by MARTIN MWITA
