Kenya’s trade deficit persists despite slowdown in imports growth

Kenya’s trade deficit widened by marginal 1.2 percent last year due to a slowdown in demand for imports compared to 2017 amid a slight growth in exports.

The deficit — the gap between imports and exports — climbed to Sh1.145 trillion in 12 months through December 2018 from Sh1.13 trillion a year earlier, fresh statistics Central Bank of Kenya released late Wednesday show.

Total imports increased 1.88 percent to nearly Sh1.76 trillion, a slower pace than exports which rose 3.16 percent to Sh612.88 billion. That means for every Sh100 that Kenya spent on buying goods from abroad, it only earned Sh35 from exports.

A higher trade deficit, economists say, slows down the creation of new jobs for the youth as most earnings within Kenya are spent on buying goods from foreign factories, increasing production and jobs there.

Kenya has made penetration of value-added farm produce such as tea, coffee and fruits to China and India a priority under the ambitious Integrated National Exports Development and Promotion Strategy unveiled last July.

“The national export growth strategy is driven by the overriding national goal of closing the balance of trade deficit through export growth, factor productivity and stimulating overall factor employment and economic development,” says State-run Export Promotion Council in the strategic plan.

The ambitious exports growth strategy targets an average annual growth in exports of 25 percent between 2018 and 2022, culminating in a trade surplus.

“In that strategy, we are looking east because the market in China and India is huge,” said EPC chairman Jaswinder Bedi on phone. “Traditionally, our market has been Europe (which we) think we will not lose but we thought we needed market expansion to hit our target.”