Kenya's current account deficit is expected to widen by $1.04 billion (Sh134.9 billion) in 2025 due to higher imports, but will remain below the projected medium-term average of four percent of GDP, the central bank has said.
The Central Bank of Kenya (CBK) said last week that the deficit was estimated at $4.54 billion (Sh587 billion) at the end of 2024, equivalent to 3.7 percent of GDP, but will rise to $5.59 billion (Sh721.9 billion) or 3.8 percent of GDP by the end of this year.
“This has reflected fairly good performance in exports, particularly horticulture, strong performance in tourism and remittances and a reduction in the oil import bill,” CBK governor Kamau Thugge said last week.
“In 2025, we do expect some stronger recovery in imports, and therefore a slight widening in the current account deficit to 3.8 percent of GDP. Over the medium term, we expect that the current account will stabilise at around four percent of GDP.”
The current account represents the balance of trade in goods and services – exports and imports, remittances and tourism earnings. When it is in deficit, it shows that forex outflows from the country exceed inflows, which in Kenya's case reflects the fact that the country is a net importer of goods.
The current account is the largest component of the overall balance of payments, which is a measure of the total economic or monetary transactions with the rest of the world.
The other main components of the balance of payments are the capital account, which measures major capital movements including foreign direct investment and foreign loans, and the financial account, which measures portfolio inflows into stock and bonds markets.
In 2024, the capital account recorded net inflows of $6.1 billion (Sh788 billion), resulting in a net balance of payments surplus of $1.47 billion (Sh189 billion) for the year.
In 2025, the CBK expects this surplus to fall to $591 million (Sh76.4 billion) as a result of the higher current account deficit.
In 2024, the CBK data shows that merchandise imports rose by 9.9 percent to $18.95 billion (Sh2.44 trillion), mainly due to an increase in imports of intermediate and capital goods, while imports of food and fuel declined.
Exports rose by 15.4 percent to $8.34 billion (Sh1.08 trillion), driven by higher sales of agricultural commodities and re-exports including those of fuel.
This year, the CBK expects imports to rise by 13.2 percent to $21.44 billion (Sh2.77 trillion) and exports by 12.3 percent to $9.37 billion (Sh1.2 trillion).
The country's trade deficit is therefore expected to widen by Sh210 billion to Sh1.57 trillion between 2024 and 2025.
Meanwhile, diaspora remittances are expected to grow by 18 percent to a record $4.95 billion (Sh639.6 billion) in 2024 and by 6.5 percent to $5.27 billion (Sh681 billion) in 2025.
