Market News

Trade deficit widens 28pc on imports of machinery, goods


Central Bank of Kenya. FILE PHOTO | NMG

Kenya’s trade deficit widened by 28 percent in the quarter ended March, mainly on increased expenditure on manufactured goods and machinery imports.

Fresh data by the Central Bank of Kenya (CBK) shows that the country’s trade deficit— the difference between exports and imports -- grew to Sh317.49 billion in the period under review from Sh247.78 billion in the first quarter last year.

A trade deficit occurs when a country's imports exceed its exports during a given time period.

The value of imports grew 19 percent to Sh507.54 billion in the quarter ended March, outgrowing the value of Kenya’s exports that rose 6.3 percent to Sh190.05 billion in the period.

The slow growth in the value of Kenya’s exports came at a time local traders are still reeling from the restrictions imposed to curb spread of the Coronavirus disease that disrupted movement of agricultural products.

highest rise

The cost of imported manufactured goods grew by Sh33.8 billion (51 percent), according the CBK data — the highest rise in the period followed by machinery that rose by Sh10.13 billion to Sh118.04 billion in the period.

The jump in imported manufactured materials and machinery saw the value of imports cross the half-a-billion mark in the quarter ended March, the first time the value of imports has crossed the mark in a quarter.

Kenya has also struggled to diversify its exports away from traditional tea, horticulture and coffee, which are largely sold raw, leaving farmers vulnerable to price shocks in international commodity markets.

The value of Kenya’s horticultural exports grew by sh6.03 billion to Sh39.36 billion in the quarter ended March.

The increase in the trade deficit shines the spotlight on Kenya’s efforts to create jobs for its youth amid the high un-employment numbers.

Economists reckon that widening of the deficit slows down the creation of new job opportunities for the growing skilled youth as most revenue earned within Kenya is spent on buying goods from foreign factories, raising production and job openings in source markets.

Fuels and minerals were the only import commodities that recorded a fall in value, declining one percent to Sh78.65 billion in the quarter ended March from similar period last year.