The Central Bank of Kenya (CBK) has projected a rebound in imports this year, as the exchange rate and dollar availability mark a significant improvement from last year.
A jump in imports is expected to put the local currency under renewed pressure, especially if exports and remittances don't expand substantially.
The apex bank sees 11 per cent growth in imports in 2024 following last year’s fall in the order of goods and services from abroad, which came against a sharp depreciation in the Kenyan Shilling and difficulties in accessing hard currency by traders and other importers.
According to CBK estimates, total imports on a free-on-board basis are expected to rise to Sh2.48 trillion ($19 billion) in 2024, in contrast to Sh2.2 trillion ($17.1 billion) last year which was a 10.6 per cent drop from Sh2.49 trillion ($19.1 billion) in 2022.
“Just like exports, there has been an improvement on imports. We do expect the import of goods to increase by 11 per cent for the year,” CBK Governor Kamau Thugge said last week.
The 2023 decline in imports was reflected by lower orders across all categories except for food and crude materials. Manufactured goods imports fell the sharpest in the period by 20.5 per cent with orders for iron and steel, textile and paper declining.
The improvement in the exchange rate in the past two months is expected to play a part in increasing imports as the cost of ordering goods and services from abroad cools down.
According to Stanbic Bank Kenya Purchasing Managers’ Index report covering March, input costs had begun moderating as the Kenyan Shilling began to gain against major world currencies including the US dollar.
“Indeed, price metrics pointed to a sustained slowdown in inflationary pressures at the end of the first quarter. Overall input costs rose at the slowest pace since February 2021, as a stronger exchange rate in the Kenyan Shilling against the US dollar helped reduce import costs,” the index noted.
Exports are likewise expected to rebound this year after declining by a marginal 2.2 per cent in 2023 to Sh946.8 billion ($7.2 billion) from Sh968.1 billion ($7.4 billion) in 2022.
Whilst the weaker exchange rate last year had been expected to prop up exports, the dispatch of goods and services from the country slacked from exchange rate related hurdles.
The International Monetary Fund (IMF) for instance noted that Kenya’s exports had underperformed as exporters struggled to obtain hard currency to import intermediate goods which are usually processed to create export goods.
