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CBK cuts projection of diaspora remittances by Sh40bn
At the beginning of the year, the CBK had a higher growth projection of 6 percent for 2026, putting the expected inflows at $5.42 billion (Sh699.9 billion) for the year.
The Central Bank of Kenya (CBK) has cut its projection of diaspora remittances for 2026 by Sh40 billion ($313 million) on expectations of lower inflows from the Middle East due to the war in Iran and recently introduced transaction taxes in Saudi Arabia.
CBK Governor Kamau Thugge said that the apex bank is now anticipating inflows of $5.1 billion (Sh659 billion) this year, which would represent a 1.4 percent increase compared to the $5.04 billion (Sh651 billion) Kenyans sent home in 2025.
At the beginning of the year, the CBK had a higher growth projection of 6 percent for 2026, putting the expected inflows at $5.42 billion (Sh699.9 billion) for the year.
The CBK said that the war in the Middle East pitting the US and Israel against Iran is now threatening flows from the region, which accounts for about 10 percent of Kenya’s annual remittance inflows, hence the downward revision.
The increased recruitment of Kenyan workers into the Gulf region has boosted diaspora remittance flows from Saudi Arabia, the UAE and Qatar.
The Iran war has however disrupted the economies of the Gulf countries, and slowed down new immigration into the region. It has also raised the prospect of slower economic growth globally due to a spike in energy prices.
“We expect a slight deceleration because of the direct impact (of the conflict) on the remittances from the Gulf area where about 10 percent of our inflows come from. But there are also potentially indirect effects arising from the possible economic growth slowdown in other countries, for example the US,” said Dr Thugge.
Diaspora remittances remain the biggest source of foreign exchange for Kenya, ahead of tourism receipts and agriculture exports, and a key contributor to the country’s current account which measures the balance between forex inflows and outflows.
The US is Kenya’s largest source market of remittance dollars, with its 2025 volumes of $2.73 billion (Sh352.6 billion) accounting for 54.2 percent of total flows. The annual growth in volumes stood at 1.9 percent in 2025 compared to a growth of 18 percent in 2024.
The CBK primarily attributed the drop to a 25.06 percent decline in inflows from Saudi Arabia to $302.1 million (Sh39 billion) from $403.12 million (Ksh52 billion) in 2024. In the first two months of 2026, remittances grew by 1.8 percent to $824 million (Sh106.4 billion).
Saudi Arabia started enforcing value added tax on services last year, requiring money transfer platforms to chare 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 captured 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.
