Kenya’s current account deficit narrowed to 4.2 percent in the 12 months to June 2023 from 4.8 percent in May, helped by exports growing at a faster pace compared to imports in the period.
The Central Bank of Kenya (CBK) said the account, which measures the balance of hard currency inflows and outflows as a percentage of GDP, is projected to end the year at a deficit of 4.8 percent, improving from 5.1 percent in 2022.
The country has seen an improved performance of exports in the first half of this year, particularly tea and manufactured goods, with a weaker shilling boosting earnings.
Remittances have also remained high despite economic challenges in source markets while tourism earnings are also ahead of last year.
At the same time, imports expenditure has fallen in the period, chiefly manufactured goods, machinery and transport equipment, and cooking oil.
“On total goods exported for the year to June 2023, we see an increase of 2.1 percent to $7.3 billion (Sh1 trillion). For the full year to December we expect that increase to rise to 6.7 percent driven by tea and horticulture exports,” said CBK governor Kamau Thugge on Thursday in a post-MPC briefing.
“Imports declined by 6.1 percent in the 12 months to June compared with an increase of 20 percent last year. We expect imports to increase but only slightly for the year…that slower growth will improve our trade balance and current account.”
Tea exports in the 12-months to June rose by 7.1 percent to $1.35 billion (Sh194.4 billion) while shipments of manufactured goods were up by 22.5 percent to Sh98.9 billion, helping offset lower earnings from horticulture, coffee and raw materials.
Travel receipts meanwhile went up by a fifth, to $618 million (Sh89 billion) in the first half of this year compared to the corresponding period in 2022, while cumulative diaspora remittances for the 12 months to June stood at $4.017 billion (Sh578 billion)against $4.012 billion a year earlier.
The CBK projects that remittances will grow by eight percent this year compared to last year’s total of $4.028 billion.
The current account has a strong bearing on the performance of the shilling whose stability is influenced by demand and supply of dollars.
Rising import costs exert pressure on dollar stocks in the economy, weakening the shilling’s position, while a scenario of rising exports helps bolster the currency by increasing the supply of hard currency in the economy.
