Kenya’s trade deficit grows on reduced exports

 

Cut flower exports dropped by 13.9 per cent in 2013. Photo/FILE  NATION MEDIA GROUP

By CHARLES MWANIKI

In Summary

• Data from the Kenya National Bureau of Statistics (KNBS) shows that in 2013 total exports declined by 2.6 per cent to stand at Sh504.3 billion compared to Sh517.8 billion in 2012.

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Kenya’s trade deficit grew by Sh45.5 billion to Sh903 billion in 2013 compared to a year earlier, driven by lower earnings from key exports such as horticulture and an increase in capital goods import costs.

Data from the Kenya National Bureau of Statistics (KNBS) shows that in 2013 total exports declined by 2.6 per cent to stand at Sh504.3 billion compared to Sh517.8 billion in 2012.

At the same time, the country’s import bill rose by 2.3 per cent to Sh1.408 trillion compared to 2012’s Sh1.376 trillion. Higher imports increase demand for foreign currencies which puts the shilling under pressure.

Reliance on imports also has the effect of increasing unemployment as local manufacturing is cut down.

“Importation of raw materials and intermediate goods remains high, especially with the huge projects taking place in the country. As we implement Vision 2030 this will be the case for quite some time, unless we raise our exports,” said Dr Gerishon Ikiara, a lecturer in international economics at the University of Nairobi.

Kenya’s main exports include food and beverages, at 42 per cent, consumer goods (28 per cent) and industrial supplies (26 per cent).

Imports, on the other hand, are mainly industrial supplies (33 per cent), fuel and lubricants (23 per cent), machinery and other capital equipment (16 per cent).

Food and beverage exports reduced by Sh21 billion between 2012 and 2013 to stand at Sh176 billion.

According to Dr Ikiara the manufacturing sector, whose competitiveness has been hampered by high power and transport costs, will benefit from ongoing plans to produce less costly power and modernisation of transport links through rail and road improvement.

READ: Government in fresh push to support manufacturing

This will help increase export of Kenyan goods by making their prices more competitive in the international market.

The Kenya Association of Manufacturers recently warned of consequences of high power costs and increased regulatory charges levied by county governments. KAM chief executive Betty Maina said that high transaction costs due to heavy regulatory charges were hampering the sector.

To buoy the industry there is need to reform the fiscal policy framework, especially on business taxes which are unfriendly to the market and by eliminating multiple regulations by counties.

The KNBS data shows that horticultural exports dropped 7.2 per cent from Sh89.9 billion in 2012 to Sh83.4 billion last year in line with a declining trend that started in 2011.

The segment accounts for nearly 18 per cent of the country’s import earnings. The data shows that cut flower exports dropped by 13.9 per cent from Sh65 billion in 2012 to Sh56 billion in 2013, while earnings from fruits dropped 4.4 per cent to Sh4.5 billion.