Food, machinery imports widen trade deficit to Sh601bn in first six months

Kenya’s major food imports include maize,
Kenya’s major food imports include maize, unmilled wheat and wheat flour, rice and sugar, according to the Economic Survey 2018. FILE PHOTO | NMG 

Kenya’s trade deficit widened by Sh55.64 billion in six months to June on increased food and machinery imports as exports remained sluggish.

The deficit — the gap between imports and exports — increased to Sh601.94 billion, up from Sh546.30 billion, according to the Kenya National Bureau of Statistics data.

Analysts say the widening deficit is piling pressure on the shilling against global currencies such as the dollar and denies Kenya an opportunity to create more jobs because locals lose out to foreign manufacturers.

The high demand for the dollar to fund imports forces the Central Bank of Kenya to intervene, depleting foreign exchange reserves.

Imports increased by Sh75.69 billion, or 8.94 per cent, to Sh921.88 billion, while exports rose at a slightly slower pace of 6.68 per cent to Sh319.94 billion. A persistently higher demand for imports than exports may mean Kenyan jobs are being lost to factories in major source markets such as China, which earned Sh202.72 billion from goods she shipped to Kenya in the six-month period.

Beijing’s shipments, however, dropped marginally from Sh213.05 billion a year earlier on reduced machinery and equipment orders for the standard gauge railway construction works. Imports from China include textile products, which are cheaper due to a relatively uncompetitive local industry.

“Time and again, the government has been trying to revamp that (textiles) sector, but with the cheaper imports, it has not been successful and something has to be done to arrest that trend,” said Genghis Capital senior research analyst Churchill Ogutu in an earlier interview.

Kenya has made the sale of value-added farm produce such as tea, coffee and fruits to China and India a priority in a new strategy unveiled on July 31, seeking to more than triple exports in four years.

The Integrated National Exports Development and Promotion Strategy targets to grow exports, which stood at Sh594.13 billion in 2017, by 25 per cent every year to Sh1.8 trillion in 2022.

Manufacturers, however, poked holes into the strategy.

“Until we comprehensively address the 12 per cent cost imbalance between Kenya and competitor countries, the exports strategy stands little chance of taking off,” Kenya Association Manufacturers chairman Sachen Gudka told the Business Daily in an interview.