Rebounding Exports Trim Kenya’s Trade Deficit In July

 

By Kepha Muiruri

Kenya’s rebounding exports in the opening seven months of the year have helped trim the country’s current account deficit to 5.1 per cent of GDP in the month of July.

According to provisional data from the Central Bank of Kenya (CBK)  on the balance of payments, the current account deficit narrowed slightly from 5.2 per cent in July of 2021.

“The narrower deficit reflects improved receipts from service exports and remittances,” the CBK stated.

The current account records the country’s transactions with the rest of the world in terms of net trade in goods and services and cross-border investments & net transfer payments.

Kenya’s current account has been under pressure from the steep rise in global commodity prices off the back of the Russia-Ukraine conflict in February.

The high global commodity prices have been mirrored by a sharp rise in import costs into the country which has partly offset gains from export growth.

Growth in exports has been cushioned by a weaker currency which has made the cost of local goods and services cheaper in the international marketplace alongside a recovery in supply chains following the onset of the COVID-19 crisis.

Data from the Kenya National Bureau of Statistics (KNBS) show the value of Kenyan exports in the six months to June rose 18.7 per cent to Ksh.434.1 billion from Ksh.365.7 billion in a similar 2021 period.

On the flip side, however, imports were up by 25.8 per cent in the same period to Ksh.1.248 trillion from Ksh.991.5 billion last year.

The CBK nevertheless estimated a wider current account deficit at the end of the 2022 calendar year at an equivalent 5.9 per cent of Gross Domestic Product (GDP).

Kenya’s current account deficit closed 2021 at an equivalent 5.5 per cent of GDP.

The country traditionally has a deficit in its current account balance given its status as a net importer of goods and services from the rest of the world.