Slow imports cut Sept current deficit to 4.1pc

Lower imports and higher diaspora remittances helped Kenya further narrow the current account deficit in September, boosting the prospects of the shilling in the foreign exchange market.

Central Bank of Kenya (CBK) in its weekly bulletin said the deficit stood at 4.1 percent of gross domestic product (GDP) in the 12 months to September, supported by higher diaspora remittances and tourism receipts, coupled with slower growth of imports of food, machinery and transport equipment.

“Preliminary data shows that the current account deficit narrowed to 4.1 percent of GDP in the 12 months to September 2019 from five percent in December 2018. This reflects slower growth of imports and resilient diaspora remittances,” said CBK in the bulletin.

Trade data shows that imports in the eight months to August fell by Sh43.4 billion to Sh1.157 trillion compared to a similar period last year.

This narrowed the country’s balance of account even though exports also fell, albeit by a smaller amount of Sh20.7 billion to stand at Sh403.1 billion in the period.

At the same time, diaspora remittances in the first nine months stood Sh9.09 billion higher compared to last year at Sh215.6 billion.

A narrowing of the current account deficit helps the shilling, due to the reduced pressure on the country’s foreign exchange reserves that finance external payments.

Although the currency has come intermittently come under pressure in recent months, it has managed to trade in a relatively narrow band of 101 to 104 units to the dollar.

The CBK projects that the current account deficit will stand at 4.5 percent by the end of the year, revising its earlier expectation of 4.8 percent.

This projection is, however, beholden to the fluid nature of inflows and outflows, which are at the whim of global commodity prices, especially oil, and potential emergency food imports of staples such as maize.