Trade deficits widens on fuel, manufactured goods imports

Kenya’s trade deficit widened by 13.49 per cent in the first two months of the year, largely on increased expenditure on manufactured materials and fuel imports.

The trade deficit — the gap between imports and exports — increased to Sh198.64 billion from Sh175.03 billion a year ago amid reduced disruptions in global supply chains and increased cost of shipping in fuel.

The value of imports rose 10.78 per cent to Sh320.45 billion between January-February 2021, provisional trade data published by the Central Bank of Kenya (CBK) suggests a higher growth than 6.63 per cent to Sh121.81 billion for exports.

A persistently higher trade deficit, economists say, slows down the creation of new job opportunities for the growing skilled youth as most revenue earned within Kenya 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 CBK in March attributed the narrower gap to a lower import bill for “machinery and transport equipment as well as improvement in tea and horticultural exports and remittance receipts”.

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.

The trade data, collated by the CBK, shows imports were largely lifted by increased expenditure on shipping in manufactured materials and chemicals, while earnings from exports were driven by horticultural sales.

Earnings from horticultural exports — cut flowers, vegetables and fruits — expanded 18.90 per cent to Sh25.86 billion in the two months, making up a fifth of total exports compared with 19.04 per cent in the prior year.

Tea and coffee exports, on the other hand, rose 7.62 and 4.85 per cent, respectively, to Sh23.1 billion and Sh3.61 billion.