The Star (Nairobi)

10 March 2014

Kenya: Lower Import Bill Narrows Kenya's Balance of Trade

Kenya slashed its import bill by nearly half in 2013 in what could be a turn-around in reducing its balance of trade.

Data supplied by the Kenya National Bureau of Statistics show that the total value of imports decreased by 48 per cent to Sh1.41 trillion, compared to Sh2.69 trillion in 2012.

This was despite significant rises in imports from Kenya's top two suppliers - India, China - in the year.

The value of goods imported across all broad categories correspondingly dropped, though percentage shares in the import basket changed just a little.

Kenya imports food and beverages, non-food industrial supplies, fuel and lubricants, machinery and other capital equipment and transport equipment.

The drop in goods imported is somewhat peculiar at a time inflow of capital equipment should have increased owing to the ongoing oil and gas explorations countrywide and ancillary services to the sectors.

Total value of exports reduced slightly by 2.7 per cent to Sh504.3 billion compared to Sh517.8 billion in the year before.

The country's balance of trade has therefore narrowed to Sh904.5 billion compared to Sh2.17 trillion, which is a 58.4 per cent reduction.

"That's very peculiar. Sh1.3 trillion is a phenomenal swing," observed Aly-Khan Satchu, CEO of Nairobi-based Rich Management and a stock market analyst.

Balance of trade - the difference between exports earnings and import spend - is the largest component of a country's current account in its balance of payments accounts.

This means the reduced balance of trade will also have a significant impact in slowing down Kenya's current account deficit.

Imports from India - the top supplier to Kenya - increased by 31.5 per cent to Sh256.6 billion from Sh195.2 billion in the previous year. China, the most fierce Asian rival to India for the Kenyan market, upped its supplies by nine per cent to Sh182.3 billion from Sh167.2 billion in 2012.

However, the United Arab Emirates, which is the third top import source for Kenya's imports, bucked from the trend with a 21.7 per cent reduction of its suppliers to Sh117.4 billion compared to Sh150 billion previously.

Uganda remained the top destination of Kenya's exports, taking up Sh52.8 billion, followed by the UK which took up Sh37.1 billion worth of supplies from Kenya.

Exports to Tanzania, Netherlands and USA in 2013 amounted to Sh35.9 billion, Sh32.3 billion and Sh29.6 billion respectively.

Kenya's top exports include tea, horticultural produce and coffee, which are the country's key foreign exchange earners besides tourism.

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