CBK foresees narrower current account gap on low import costs

Central Bank of Kenya Governor Patrick Njoroge on December 1, 2022. PHOTO | LUCY WANJIRU | NMG   

By KEPHA MUIRURI More by this Author

The Central Bank of Kenya (CBK) has projected a narrower current account deficit this year on falling import costs.

The apex bank expects the current account deficit to close at 4.8 percent of GDP at the end of this year from an earlier projection of 5.4 percent in March.

The current account measures a country’s international competitiveness, with a deficit usually seen as an indicator of excessive imports.

Read: Current account deficit falls, exports, remittances up

“The current account deficit was 5.1 percent of GDP in 2022, and is projected to improve to 4.8 percent of GDP in 2023,” the CBK said in its Monetary Policy Committee statement.

“Imports grew by 1.2 percent in the 12 months to April 2023 compared to 21.3 percent in a similar period in 2022, with lower imports of infrastructure-related equipment due to completed projects. Oil prices have continued to moderate from the fourth quarter of 2022.”

On the flip side, the export of goods has remained strong growing by 6.6 percent over the same period with receipts from tea exports and manufactured goods increased by a notable 11.6 and 30.4 percent respectively.

“The increase in receipts from tea exports reflects improved prices attributed to demand from traditional markets. Receipts from services exports increased reflecting sustained improvement in international travel and transport,” the CBK added.

Diaspora remittances are, meanwhile, up by 0.4 percent across 12 months to April despite a slight decline in the inflows so far this year.

The current account represents the country’s imports and exports of goods and services, payments made to foreign investors and transfers such as foreign aid.

Kenya’s current account usually presents a deficit representing the country’s position as a net importer of goods and services.

Read: CBK sees current account deficit rising to 5.9 percent

In 2022, Kenya’s current account deficit stood at 5.1 percent of GDP on account of increased spending on imports and payments for services but was lower than the 5.2 percent of GDP posted in 2021.

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