Kenya’s trade deficit exceeds Sh1trn mark Imports soar

0

Market news

Kenya’s trade deficit exceeds Sh1trn as imports skyrocket


Secretary of the Industrialization and Commerce Cabinet Betty Maina. PHOTO | DENNIS ONSONGO | NMG

BDgeneric_logo

Summary

  • Data from the Central Bank of Kenya (CBK) shows the gap between merchandise imports and exports widened by 37.7 percent from 807.01 billion shillings over a similar period Last year.
  • This year, government imports rose 31 percent to 63.5 billion shillings, with the biggest jump recorded in October when they hit a new monthly high of 12.3 billion shillings.
  • The economy contracted 0.3% last year but recovered in the first two quarters of 2021 to grow 0.7% and 10.1% respectively.

Kenya’s trade deficit reached 1.110 billion shillings in the 10 months to October due to increased imports of industrial products, fuel and government.

Data from the Central Bank of Kenya (CBK) show that the gap between merchandise imports and exports widened by 37.7% from 807.01 billion shillings during a similar period l last year, when low fuel prices and falling demand for consumer goods limited imports.

This year, government imports rose 31 percent to 63.5 billion shillings, with the biggest jump recorded in October when they hit a new monthly high of 12.3 billion shillings.

The state purchases products such as weapons and military vehicles, railway parts, drugs, vaccines and medical equipment. It also imports food when there is a shortage in the country.

The county’s total import bill – both from the government and the private sector – rose 28.4 percent to 1.7 trillion shillings during the period, eclipsing the growth in exports, which rose by 14 percent to 608.4 billion shillings.

A growing trade deficit decreases the country’s foreign exchange reserves, which are used to pay for imports, and in the process weakens the shilling.

At the same time, a weaker shilling also worsens the deficit, given Kenya’s position as a net importer. This year, the shilling has depreciated 4% against the dollar, currently trading at 113 units against the greenback.

The increase in imports this year is driven by a recovery in the economy, which was hit hard last year by Covid-19 prevention restrictions which have resulted in lower consumer spending.

The economy contracted 0.3% last year but recovered in the first two quarters of 2021 to grow 0.7% and 10.1% respectively.

Rising oil prices this year have also pushed up the import bill, as have imports of industrial goods as factories return to full production as the economy reopens.

The cost of imports has generally skyrocketed globally due to persistent disruptions in global supply chains that have increased shipping costs.

[email protected]

Share.

About Author

Comments are closed.