Economy

Kenya’s trade deficit up 38pc to Sh988bn

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Central Bank of Kenya. FILE PHOTO | NMG

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Summary

  • KNBS shows the gap between merchandise imports and exports climbed to Sh988.51 billion in the review period from Sh713.37 billion in the same period a year ago.
  • The cost of imports has soared globally on persistent disruptions in global supply chains which have increased shipping expenses amid a resurgence in global oil prices for non-oil producing countries such as Kenya.
  • The provisional data indicate Kenyan traders spent Sh1.53 trillion in the January-September 2021 period on imports, a 28.04 percent year-on-year jump compared to Sh1.2 trillion in the previous period.

Kenya’s trade deficit for nine months to September widened 38.57 due to a growing appetite for foreign manufactured goods, fuel and the soaring cost of imports following Covid-19 related supply chain disruptions.

Trade data collated by the Kenya National Bureau of Statistics (KNBS) shows the gap between merchandise imports and exports climbed to Sh988.51 billion in the review period from Sh713.37 billion in the same period a year ago.

The cost of imports has soared globally on persistent disruptions in global supply chains which have increased shipping expenses amid a resurgence in global oil prices for non-oil producing countries such as Kenya.

The provisional data indicate Kenyan traders spent Sh1.53 trillion in the January-September 2021 period on imports, a 28.04 percent year-on-year jump compared to Sh1.2 trillion in the previous period.

Imports grew at a faster pace ahead of the 13.29 percent growth in export earnings to Sh543.5 billion at a time Kenya’s tea and cut flowers fetched lower revenue.

Economists reckon that a persistently higher trade deficit slows down the creation of new jobs for Kenya’s growing skilled youth as most revenue is spent on buying goods from foreign factories, raising production and job openings in source markets.

A widening deficit in goods trade also piles some pressure on the shilling as the demand for dollars remains elevated.

The shilling is, for example, trading at record lows of 112.29 units against the US dollar — a 2.85 percent depreciation year-to-date.

Central Bank of Kenya (CBK) governor Patrick Njoroge said at his most recent monthly briefing’s in September that price pressures in global markets – driven by supply constraints in major global ports in China and US and rising oil prices — were a “greater concern” to containing the rise in cost goods and services in a net import economy like Kenya.

“This (cost pressure) has been heightened by supply bottleneck. So (there are)… difficulties in getting supplies where they should be and this is not necessarily finished products, but sometimes components,” said Dr Njoroge on September 29.

“That’s a big concern because it will lead to significant increases in pricing of products.”

The provisional KNBS trade statistics, sourced from the Kenya Revenue Authority (KRA), show expenditure on fuel imports shot up more than half in the review period, climbing 53.47 percent to Sh257.27 billion.

The import bill for non-food industrial supplies climbed 32.39 percent to nearly Sh607.80 billion, while machinery shipped into the country increased 13.67 percent to Sh220.71 billion.

On the other hand, earnings from cut flowers exports fell 7.46 percent to Sh78.06 billion in the nine months, while revenue from the sale of tea abroad dropped 3.80 percent to Sh95.62 billion at a time increased global supply has hurt prices.

Kenya has struggled to diversify its exports away from traditional tea, horticulture and coffee, which are largely sold raw, exposing its farmers to price shocks in international commodity markets.