The Central Bank of Kenya (CBK) maintains that the current account deficit to close the year at 5.2 percent despite an uptick in imports that has pushed it higher in the past two months relative to the beginning of this year.
The current account — which measures inflows and outflows of hard currency — widened to 5.4 percent of gross domestic product in the 12 months to June compared to 4.8 percent at the end of last year.
This has been driven by a higher import bill due to rising oil prices and the continuing recovery of the economy that has raised consumer spending and industrial imports.
Exports and diaspora inflows have also gone up, although at a slower pace compared to imports.
The continuing struggles of the tourism sector have weighed against a lower current account deficit, with arrivals lower by more than 70 percent compared to the pre-pandemic period.
“It is at 5.4 percent in June and we expect that will remain at 5.2 percent for the year.
“There have been significant transactions on the capital accounts side as well with the flows received (from external loans) at the end of June,” said CB governor Patrick Njoroge last week.
In the first six months of the year, Kenya’s imports went up by 21.9 percent compared to a similar period in 2020, mainly reflecting increases in imports of oil and other intermediate goods.
Exports grew by 11.1 percent in the period, backed by higher earnings from horticulture and manufactured goods, which rose by 29.4 percent and 45.2 percent respectively.
The CBK said that receipts from tea exports fell by 5.5 percent, however, attributed to the impact of accelerated purchases in 2020 when buyers were stocking up in fear of supply chain disruptions due to the Covid-19 outbreak.
Remittances rose by 20.4 percent in the first half of 2021 to 1.75 billion (Sh190.1 billion), and are expected to remain robust for the rest of the year.