5 March 2018

Kenya: High Food, SGR Imports Push Trade Deficit to Sh1.13 Trillion

Kenya's trade deficit hit Sh1.13 trillion last year from Sh853.68 billion a year earlier largely because of doubling of food imports and shipping in of transportation equipment such as SGR wagons and locomotives amid flat exports.

The deficit -- the gap between imports and exports -- widened by Sh277.25 billion compared with 2016, data from Kenya National Bureau of Statistics shows.

Imports rose by 20.49 per cent to Sh1.725 trillion, while exports expanded by a measly 2.78 per cent to Sh594.13 billion.

A widening deficit denies Kenya an opportunity to create more jobs because domestic firms lose out to foreign manufacturers. The yawning gap between imports and exports further piles pressure on the shilling against global currencies such as the US dollar.

"Kenya's export performance has been relatively weak compared to a lot of sub-Saharan Africa's peers and ... that means considerations around foreign exchange stability are even more important to Kenya's macroeconomic stability outlook than what has been the case traditionally," said Standard Chartered Bank chief economist for Africa Razia Khan on January 28.

The shilling was, however, among the most steady in sub-Saharan Africa in 2017 after it shed off a marginal 0.66 per cent against the dollar.

The stability was largely on account of $4.253 billion (Sh430.79 billion) fresh foreign debt and increased inflows from Kenyans abroad, which hit a record Sh197.12 billion, helping boost foreign exchange reserves.

Poor weather prompted subsidies and waiver of import duties to smoothen purchase of food such as maize and sugar from abroad to meet demand and ease spiking prices followed a biting drought. Food imports more than doubled to Sh244.72 billion, representing a growth of 113.33 per cent over 2016.

Industrial supplies, however, accounted for the largest share of the imports at Sh550.94 billion, which was a 7.76 per cent growth compared with 2016.

Importation of machinery was flat at Sh310.83 billion compared with Sh309.63 billion a year earlier, while transport equipment jumped more than a third to nearly Sh197.44 billion.


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