Trade deficit starts to rise as imports go up

Kenya’s trade deficit widened by four percent in January compared to the corresponding month last year as imports started to go up after months of decline.

Central Bank of Kenya (CBK) data shows the difference in value of goods and services imported and those exported in January stood at Sh106.4 billion compared to Sh102.3 billion recorded in the same period last year.

Kenya mainly import petroleum products, vehicles, household goods, pharmaceuticals and machinery, while exporting tea, cut flowers, vegetables and coffee.

The country’s import bill last month stood at Sh160.7 billion, against exports receipts of Sh54.3 billion.

The Covid pandemic caused a fall in imports for the better part of last year, due to reduced demand and trade supply chain disruptions as counties instituted restrictions to control the pandemic.

Total imports of goods in the 12 months to December 2020 thus declined 12.5 percent compared the previous year, while exports grew 3.3 percent compared to 2019, largely helped by higher horticulture earnings.

The data shows the surge in imports bill in the first month of this year is largely attributed to higher cost of fuel and lubricants, animal and vegetable oils and manufactured goods.

Fuel prices have particularly gone up sharply this year, with the price of a barrel of crude oil in the international market rising  from $51.70 on January 1 to $64.16 at the end of last week. Kenya, however imports refined products, which also attract other charges related to refining.

The rising trade gap is likely to renew pressure in the country's foreign reserves, risking the stability of the shilling’s exchange rate. It is currently exchanging at 109.80 against the dollar, having depreciated by 0.58 per cent since the beginning of the year.

Even so, analysts at NCBA Bank in their March economic report have said that muted dollar demand from the market and agriculture export inflows will help stabilise the shilling in the short-term.