Kenyans are set to be hit hard as United States (US) lawmakers unveil a draft bill seeking to impose a 5 per cent excise tax on remittances sent abroad.
The move is likely to significantly affect immigrant communities, with Kenya expected to be among those most affected, given its heavy reliance on diaspora remittances. This proposal marks another major policy shift under President Donald Trump’s administration, which has introduced stringent immigration and change in trade policies in recent months.
Introduced in the House of Representatives, the proposal, targets payments made by United States residents to recipients in foreign countries. Kenya is the leading recipient of diaspora inflows in East Africa, receiving $4.8 billion (Sh674.1 billion) in 2024, which contributed 4.6 per cent of its gross domestic product (GDP), according to a World Bank report.
This surpasses Somalia’s $1.73 billion (Sh223.5 billion) and Uganda’s $1.49 billion (Sh192.5 billion), data from the bank shows. Other countries in the region, such as Tanzania, Rwanda, and Burundi, recorded inflows below $1 billion (Sh129.2 billion).
“While Kenya has seen strong growth,” the World Bank noted, “ the sub-Saharan Africa as a whole experienced an estimated 2.4 per cent growth in remittance flows in the past year.” However, this is likely to change with the new move by the US government.
Kenya National Bureau of Statistics (KNBS) estimates that diaspora remittances saw a 14 per cent increase from Sh591.2 billion in 2023 to Sh674.1 billion in 2024, accounting for the largest source of foreign inflows into Kenya.
In that period, revenue from remittances surpassed tourism, foreign direct investments, and key agricultural exports such as horticulture and tea revenues, placing it as Kenya’s chief foreign revenue earner. Kenya’s tourism sector reached new heights in 2024 with earnings rising by 19.79 per cent to Sh452.20 billion, up from Sh377.49 billion in 2023.
“Kenya’s tea industry generated Sh250 billion in revenue from both local and international sales as horticulture exports earned Sh136.7 billion shillings, down from $1.21 billion (Sh156.3 billion) in 2023,” the 2025 KNBS reported.
Foreign inflows
The stock of foreign direct investment (FDI) assets also rose by 15.1 per cent to Sh428.9 billion at the end of 2024, highlighting the growth of the foreign inflows in the country, proving diaspora remittances as the leading foreign inflows earner. The growth in inflows has also been threatened as Donald Trump, the US president continues to deport foreigners in the United States.
In January, U.S Immigration and Customs Enforcement (ICE) identified nearly two million undocumented immigrants for deportation. That same month, Trump announced plans to revoke birth-right citizenship privileges for children born to non-citizens.
Foreign Affairs ministry estimates that more than three million Kenyans reside in the Diaspora with the majority in the United States and the United Kingdom.
Reduced number of migrant workers who send money home could lead to a decline in remittances, which are a significant source of income for many developing countries which could potentially cause economic instability and social challenges.
While the US is a major contributor, other regions like the Americas (including Canada), Australia, and the Gulf also show growth in remittances to Kenya.
Kenyans living in the diaspora have become an integral part of Kenya’s economy as remittances continue to support Kenya’s current account and foreign exchange market, helping maintain adequate foreign reserves.
Additionally, these remittances have become a lifeline for many Kenyan families, aiding in basic needs like food, education, and healthcare. They also boost aggregate demand, encourage investment, and improve trade balance.
The growth of the diaspora remittances can also be attributed to the local financial institutions who play a crucial role in facilitating remittances in Kenya by providing infrastructure, promoting financial inclusion, and developing targeted products for the diaspora. B
