A slowdown in importation helped to boost the country’s export earnings last year, cutting the current account deficit to a 16-year low, new data by the Central Bank of Kenya (CBK) shows.
The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the products it exports.
The CBK data showed that Kenya’s current deficit for 2023 was an equivalent of 3.9 percent of the gross domestic product (GDP)—the lowest level since 2007 when it stood at 3.2 percent of GDP. The current account deficit has improved from 5.2 and five percent in 2021 and 2022, respectively.
The reduction of imports across the year helped trim the gap between total imports to total exports from a previous projection of 4.1 percent of GDP by the CBK.
Imports were down on a year-over-year basis last year largely from the weakening of the Kenya shilling, which made imports more expensive, cutting demand by merchant traders and other importers.
The decline in imports of machinery and transport equipment is however attributable to the completion of major infrastructure projects in the country.
Additional data from the CBK shows the value of imported goods between January and October fell by 15.3 percent to Sh2.2 trillion ($13.759 billion) from Sh2.6 trillion ($16.247 billion) a year prior.
Most major goods categories recorded a decline in import value including, mineral fuels and lubricants, animal and vegetable oils, chemicals and related products, manufactured goods, machinery, and transport equipment.
The value of imported petroleum products in the eight months dropped by 26.6 percent to Sh523.2 billion ($3.256 billion) from Sh767.7 billion ($4.778 billion).
Only food and live animals grew in the period, rising by 22 percent to Sh333.1 billion ($2.073 billion from Sh273 billion ($1.699 billion).
The significant drop in imports was adequate to offset a marginal deceleration in exports which also declined by 2.1 percent in the same period to Sh980.8 billion ($6.104 billion) from Sh1 trillion ($6.234 billion).
Animal and vegetable oil exports recorded the largest decline at 31.8 percent while coffee and beverages exports were down 17.4 and 10.3 percent respectively.
Cement and pharmaceutical exports however rose significantly by 60.3 and 20.3 percent respectively.
While the weaker shilling had been expected to prop up exports, the International Monetary Fund (IMF) noted that dollar access constraints had restricted exporters from obtaining key input supplies through imports.
“Exports are projected to have underperformed in 2023 due to forex market dysfunction, for example, through increased transaction costs of securing foreign exchange for imported intermediate goods,” the IMF stated.
Kenya is a net importer country implying the country imports more than it exports, resulting in a persistent current account deficit.
The prolonged stay of a current account deficit has been partly blamed for the depreciation of the local currency.
The current account records a country’s transactions with the rest of the world including net trade in goods and services, net earnings on cross-border investments, and its net transfer payments.
