Current account gap widens on low diaspora inflows

Kenya’s current account deficit widened to 5.0 percent in the 12 months to September, hit by a drop in diaspora remittance inflows.

Data by the Central Bank of Kenya (CBK) shows the deficit expanded from 4.7 percent recorded both in the 12-month period to August and July.

The stretched current account deficit is attributed to the decline in the month-to-month diaspora remittance inflows between August and September.

Despite this, the CBK maintains that the current account deficit remained anchored due to an improvement in remittances in a 12-month period compared to a similar period last year that also saw lower imports bill as a result of lower global oil prices.

The remittance inflows amounted to $260.7 million (Sh28.16 billion), a 4.9 percent drop compared to $274.1 million (Sh29.60 billion) in August.

This, however, represented a 21.4 percent increase from $214.7 million in September 2019, while the cumulative inflows in the 12 months to September totalled to $2,967 million (Sh322.81 billion) compared to $2,786 million (Sh303.12 billion) in the 12 months to September 2019.

“Provisional data on balance of payments shows that the current account deficit narrowed to 5.0 percent of GDP in the 12 months to September 2020 compared to 5.4 percent of GDP during a similar period in 2019,” CBK said in the weekly bulletin in reference to the year-on-year current account deficit position.

“This reflected lower oil imports and strong performance of exports, particularly tea, as well as resilient remittances.”

The current account deficit which record net inflows from trade, cross border investments and transfer payments follows a period that has recorded declined tourism, export earnings and capital flows.