Kenya’s current account deficit widened by Sh6.8 billion to Sh485.45 billion ($4.821 billion) in the 12 months to June, showing the rising value of imports and more payments to foreigners.
Data from the Treasury shows that the high trade balance was due to the acceleration in the value of imports relative to exports while the increased amount paid to foreign investors had to do with high interest payments.
The widening of the account happened despite the upward growth in remittances from Kenyans abroad.
The remittances grew by 38.6 per cent to $2.44 billion equivalent to Sh245.5 billion in the year to June compared to $1.77 billion or Sh177.17 billion in the year ending June 2017.
“The current account balance registered a deficit of $4.821 billion in the year to June 2018 compared to a deficit of $4.753 billion in the year to June 2017,” said the Treasury. “This reflects the widening of the trade account balance and the increased payments to foreign investors (due to high interest payments) despite an improvement in the secondary income account balance particularly increased workers’ remittances,” the exchequer added.
However, a faster estimated growth in the gross domestic product (GDP) pushed down the proportion of the current account deficit to GDP to 5.8 per cent compared to 6.4 per cent in June last year.
Whereas the boost in remittances was not enough to offset the increase in current account deficit it contributed — along with agricultural exports and tourism receipts — to reducing the proportion of the deficit relative to GDP.
“As a percentage of GDP, the current account balance narrowed to 5.8 per cent in June 2018 from 6.4 per cent in June 2017 supported by strong growth of agricultural exports particularly tea and horticulture, resilient diaspora remittances, and improved tourism receipts,” said the Treasury.
The overall balance of payment deficit was also wider, in line with the increase in the current account deficit.
The deficit widened to Sh50 billion in the year to June from Sh41.6 billion in the previous 12-month period to June 2017.
“The overall balance of payments position was at a deficit of $496.6 million in the year to June 2018 from a deficit of $413.2 million in the year to June 2017. “This balance was supported by improvement in the capital and financial account despite the increased current account deficit,” said the Treasury report.