Kenya’s trade deficit climbs 38 percent to Sh988 billion

BY CONSTANT MUNDA
More from this author

summary

• KNBS shows that the gap between goods imports and exports increased from Sh713.37 billion in the same period a year ago to Sh988.51 billion in the reporting period.
• Import costs have skyrocketed worldwide due to persistent disruptions in global supply chains that have increased shipping costs amid the resurgence of global oil prices for non-oil producing countries like Kenya.
• Preliminary data indicates that Kenyan traders spent Sh1.53 trillion on imports in January-September 2021, a 28.04 percent year-on-year jump from Sh1.2 trillion in the previous period.

Kenya’s trade deficit widened by 38.57 for nine months to September as appetites for foreign manufactured goods, fuels and soaring import costs increased after supply chain disruptions related to Covid-19.

Trade data compiled by the Kenya National Bureau of Statistics (KNBS) shows that the gap between goods imports and exports increased from SH713.37 billion in the same period a year ago to SH988.51 billion during the reporting period.

Import costs have skyrocketed worldwide due to persistent disruptions in global supply chains that have increased shipping costs in the face of the resurgence of global oil prices for non-oil producing countries like Kenya.

Preliminary data shows that Kenyan traders spent Sh1.53 trillion on imports in January-September 2021, a 28.04 percent year-on-year jump from Sh1.2 trillion in the previous period.

Imports grew faster before export revenues grew 13.29 percent to Sh543.5 billion at a time when Kenya’s tea and cut flowers were generating lower revenues.

Economists believe that a persistently higher trade deficit will slow job creation for Kenya’s growing skilled youth, as most of its revenue is spent on buying goods from overseas factories, increasing production, and creating jobs in source markets.

A widening deficit in commodities also puts pressure on the shilling as demand for dollars remains high.

For example, the shilling is trading at record lows of 112.29 units against the US dollar – a loss of 2.85 percent since the beginning of the year.

The Governor of the Kenyan Central Bank (CBK), Patrick Njoroge, said at his most recent monthly briefing in September that price pressures in world markets – driven by supply bottlenecks in major global ports in China and the US and rising oil prices – are a “major concern” to contain the rise in the cost of goods and services in a net import economy like Kenya.

“This (cost pressure) was intensified by delivery bottlenecks. So there are (there are) … difficulties getting supplies to where they should be and these are not necessarily finished products, but sometimes components, “said Dr. Njoroge on September 29th.

“This is a major concern because it will lead to significant price increases for products.”

Preliminary KNBS trade statistics, taken from the Kenya Revenue Authority (KRA), show spending on fuel imports increased by more than half during the reporting period, increasing 53.47 percent to Sh257.27 billion.

The import bill for industrial non-food supplies climbed 32.39 percent to nearly $ 607.80 billion, while machines shipped inland rose 13.67 percent to $ 220.71 billion.

On the flip side, revenue from cut flower exports fell 7.46 percent to 78.06 billion shutters in the nine months, while revenue from overseas tea sales fell 3.80 percent to $ 95.62 billion, while the global supply has reduced prices.

Kenya is struggling to diversify its exports away from traditional tea, horticulture and coffee, most of which are sold raw, exposing its farmers to price shocks in international commodity markets.