Kenyan imports dropped by nearly 14 percent in the first eight months of the year, highlighting the impact of the weakening shilling on the purchasing power of the local currency.
The shilling had weakened against the dollar by 17 percent, making imports more expensive because these are mainly funded using greenbacks purchased in the local market. This has also partly contributed to the high inflation experienced this year.
Trade data released by the Central Bank of Kenya (CBK) on Wednesday shows that Kenya’s imports in the period fell by 13.8 percent to $11.45 billion (Sh1.7 trillion) from $13.28 billion (Sh1.97 trillion) in the corresponding period of 2022.
All broad product categories recorded lower imports, as per the CBK data, except food and live animals whose purchases rose by 28.3 percent to $1.71 billion (Sh254 billion).
Imports of manufactured goods meanwhile declined by the largest margin at 27.3 percent, coming in at $1.81 billion (Sh269 billion) compared to $2.49 billion (Sh370 billion) previously.
“Normally the depreciation works to incentivise exports and make imports more expensive, so that you slow down imports and thus reduce foreign exchange demand and pressure on the exchange rate to depreciate,” CBK governor Kamau Thugge said in a Monetary Policy Committee briefing.
“This is one of the factors. There are other factors, for example, in machinery and equipment, which reflect partly on the fact that the government has finished some of its projects and is therefore not importing machinery as before.”
Other categories recording import declines were mineral fuels and lubricants (19.9 percent), animal and vegetable oils (20.9 percent) machinery and transport equipment (18.9 percent) and chemicals (14.3 percent).
The negative impact of the cost of dollars has been seen on motor vehicle sector, where dealers and assemblers have had to raise prices to cover their higher expenses and protect margins.
Manufacturers shipping in raw materials have also had to adjust their prices to protect their margins from the higher costs, meaning that the impact of the shilling is also being felt in the price of locally made goods.
Meanwhile, the expected boost to exporters because of the weaker shilling has not been as pronounced, with total export earnings in the eight months falling by 2.2 percent to $4.92 billion (Sh731 billion).
Earnings declines were seen in tea, coffee, horticulture, beverages and tobacco, cooking oils and apparel.
