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Kenya's trade deficit drops Sh33.6bn on corona woes

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The Central Bank of Kenya building in Nairobi. FILE PHOTO | NMG

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Summary

  • Kenya imported goods worth Sh556.2 billion in the four months to April 2020, a decline of Sh17.4 billion from a year earlier, while export earnings rose by Sh16.2 billion to hit Sh221.9 billion in the four months.
  • The import bill has largely come down due to lower fuel costs in the period following a steep decline in global crude prices as demand fell due to the Covid-19 restrictions in many economies.
  • Disruptions in global supply chains due to the coronavirus have impeded trade between countries.

Kenya’s trade deficit narrowed by Sh33.6 billion in the four months of the year compared to a similar period in 2019, helped by a lower import bill and an uptick in export earnings.

Data from the Central Bank of Kenya shows that the country imported goods worth Sh556.2 billion in the four months to April 2020, a decline of Sh17.4 billion from a year earlier, while export earnings rose by Sh16.2 billion to hit Sh221.9 billion in the four months.

The import bill has largely come down due to lower fuel costs in the period following a steep decline in global crude prices as demand fell due to the Covid-19 restrictions in many economies. As a result, the price of a litre of petrol and diesel in Nairobi had come down to Sh83.33 and Sh78.37 in the May review, from Sh109.50 and Sh101.78 respectively at the beginning of the year.

Disruptions in global supply chains due to the coronavirus have also impeded trade between countries. Locally, hundreds of thousands of jobs have been lost following the restrictions in economic activity to control the spread of the virus, hitting hard the purchasing power in the economy, which is largely fed by imported goods.

On the export side, while volumes have been hurt by the global trade disruption, higher prices, especially on tea, have helped moderate some of the losses.

The CBK data shows that tea export earnings rose to Sh47.4 billion in the four months to April, from Sh40 billion in the similar period last year.

“The (export) sector will continue to benefit from the recent cessation of restrictions in key destination markets and increased cargo capacity,” said CBK in a release following the Monetary Policy Meeting last month.

Horticulture and coffee earnings were, however, lower in the period than last year at Sh7.92 billion for coffee and Sh38.6 billion for horticulture compared to Sh8.26 billion and Sh41.7 billion respectively last year.

CBK added that the volume of flower exports was lower by 36.5 percent in April 2020 compared to April 2019, but higher prices moderated the impact of the lower volumes. The reopening of European economies will particularly help flower exports, which had all but been halted by the lockdowns.