Kenya’s trade deficit crosses Sh1trn mark imports soar

Industrialisation and Trade Cabinet secretary Betty Maina. PHOTO | DENNIS ONSONGO | NMG

By ELIZABETH KIVUVA
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Summary

• Data by the Central Bank of Kenya (CBK) shows the gap between merchandise imports and exports widened by 37.7 percent from Sh807.01 billion in a similar period last year.
• This year, government imports have gone up by 31 percent to Sh63.5 billion, with the most significant jump seen in October when they hit a new monthly high of Sh12.3 billion.
• The economy contracted by 0.3 percent last year but turned around in the first two quarters of 2021 to grow by 0.7 percent and 10.1 percent respectively.

Kenya’s trade deficit hit Sh1.11 trillion in the 10 months to October on the back of higher industrial goods, fuel and government imports.

Data by the Central Bank of Kenya (CBK) shows the gap between merchandise imports and exports widened by 37.7 percent from Sh807.01 billion in a similar period last year when low fuel prices and reduced demand for consumer goods kept a lid on imports.

This year, government imports have gone up by 31 percent to Sh63.5 billion, with the most significant jump seen in October when they hit a new monthly high of Sh12.3 billion.

The State purchases products such as military weapons and vehicles, railway spare 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 government and private sector — rose by 28.4 percent to Sh1.72 trillion in the period, eclipsing the growth in exports, which went up by 14 percent to Sh608.4 billion.

A widening trade deficit diminishes the country’s foreign currency reserves, which are used to pay for the imports, and in the process weakening 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 against the dollar by four per cent, currently exchanging at 113 units to the greenback.

This year’s higher imports have come on the back of a revival of the economy, which was badly battered last year by Covid-19 prevention restrictions that caused a fall in consumer spending.

The economy contracted by 0.3 percent last year but turned around in the first two quarters of 2021 to grow by 0.7 percent and 10.1 percent respectively.

Higher oil prices this year have also pushed up the import bill, as have imports of goods for industrial use as factories return to full-capacity production on the reopening of the economy.

The cost of imports has generally soared globally on persistent disruptions in global supply chains which have increased shipping expenses.

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