Kenya’s trade deficit, the gap between imports and exports, narrowed by 9.7% or $727 million in the first eight months of 2023, according to the latest data from the Kenya National Bureau of Statistics (KNBS). This was mainly due to a decline in imports of industrial supplies, petroleum products, and machinery and increased exports of tea and horticulture.
The trade deficit measures how much a country spends on importing goods and services compared to how much it earns from exporting them. A lower trade deficit means a country is less dependent on foreign markets and more competitive in the global economy.
According to the KNBS, Kenya’s total imports from January to August 2023 amounted to $11.2 billion, a slight decrease of 2.05% from the same period in 2022. The value of industrial supplies, which accounted for 35% of the total imports, dropped by 9.36% to $3.93 billion. The value of petroleum products, which represented 24.5% of the total imports, fell by 7.92% to $2.7 billion. The value of machinery and other capital goods, which comprised 11.2% of the total imports, also declined by 6.28% to $1.25 billion.
On the other hand, Kenya’s total exports from January to August 2023 increased by 12.63% to $4.4 billion compared to the same period in 2022. The value of tea exports, which accounted for 23.6% of the total exports, rose by 18.5% to $1.04 billion. The value of horticulture exports, representing 19.8% of the total exports, grew by 15.4% to $870 million.
The KNBS data also showed that Kenya’s main trading partners in 2023 were China, India, Uganda, Saudi Arabia, and the United States. China remained the largest source of imports for Kenya, with a share of 19.8%, followed by India with 12%, and Saudi Arabia with 7%. Uganda was the largest destination for Kenya’s exports, with a share of 10%, followed by the United States with 9% and Pakistan with 8%.
The improvement in Kenya’s trade balance was in line with the projections of the central bank governor Kamau Thugge, who said in July that he expected exports to increase by about 6.7% and imports to remain broadly unchanged in 2023.
“That slower increase in imports and a large increase in exports will improve our trade balance and current account deficit,” he said.
The current account deficit is a broader measure of a country’s external transactions, including trade in goods and services and income and transfers. A lower current account deficit means that a country earns more foreign exchange than it is spending, which can help boost its currency and foreign reserves.
According to the International Monetary Fund (IMF), Kenya’s current account deficit is expected to narrow from 5% of gross domestic product (GDP) in 2022 to 4.7% in 2023 and 4.5% in 2024.
The IMF projected that Kenya’s GDP would grow by 6% in 2021 and 6.7% in 2022, supported by strong performance in agriculture, construction, manufacturing, and services.
The IMF also commended Kenya’s efforts to implement fiscal reforms and reduce public debt, which reached 69% of GDP in June 2023.
“Kenya has made commendable progress under its reform program supported by the IMF,” the IMF said.
The IMF approved a $2.34 billion loan for Kenya in April to help the country cope with the economic and social challenges posed by the pandemic and support its reform agenda.
The loan was part of a three-year arrangement under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF), which aim to reduce debt vulnerabilities, strengthen revenue mobilization, enhance monetary policy effectiveness, and foster inclusive growth.
As Kenya continues to improve its trade balance and economic outlook, it also faces challenges such as rising inflation, political uncertainty ahead of the general elections in August 2022, and potential disruptions from new variants of COVID-19.
However, with prudent policies and strong external support, Kenya has shown resilience and optimism in overcoming these challenges and achieving its development goals.
Source: Business Insider Africa
