Current account deficit narrows to Sh107bn as growth picks up

The shilling’s exposure to external shocks reduced in the first three months of the year after the current account deficit narrowed for the second quarter in a row.

The deficit fell to Sh107.88 billion in the quarter to March compared to Sh129.83 billion in the previous quarter – a 16.9 per cent reduction equivalent to Sh21.95 billion. The deficit also narrowed by nearly the same margin compared to the same quarter (first) of 2017.

The fall in the deficit resulted from a faster growth in merchandise exports relative to imports, improvement in value of exported services while remittances also shot up during the period, according to data from the Kenya National Bureau of Statistics.

“Merchandise exports grew by 7.1 per cent to Sh162.9 billion in the first quarter, while merchandise imports (valued on free-on-board basis) grew by 6.5 per cent to Sh432.1 billion, in the same quarter,” the Kenya National Bureau of Statistics (KNBS) said.

READ: Current account gap narrows to 6.1pc on lower food imports

The deficit had been rising in successive quarters before beginning to fall in the last quarter (Oct-Dec) of 2017. In the first quarter of this year, international trade in services was also favourable to Kenya as it registered a bigger surplus of Sh49.3 billion compared to Sh38.5 billion in the same period last year.

“Receipts from international services increased by 10.8 per cent to Sh129.4 billion in the quarter under review partly on account of improved tourism earnings,” said the KNBS.

Remittances from other countries rose to Sh65.92 billion in the review period compared to Sh58.89 billion in the previous quarter. The jump from the same quarter of last year was even bigger, from Sh45.12 billion to Sh65.92 billion, an increase of over Sh20 billion or nearly 50 per cent.

“Remittances increased substantially in the first quarter of 2018 and boosted the secondary income to record a surplus of Sh129.3 billion,” said the KNBS.