NAIROBI, Kenya, Jan 18 – Kenya’s trade deficit dropped significantly in the 10 months to October 2016 with a year on year decline of 13.2 percent.
The trade deficit of Sh705 billion is the lowest import-export difference since 2012 according to the Kenya National Bureau of Statistics.
The improvement in trade deficit was mainly driven by an 8.8 percent drop in imports with transport equipment declining by 6 percent and fuel imports remaining fairly static.
“The drop in imports was driven by reduced purchases of transport equipment – averaged 10.4 percent of total imports in 2016 versus 16.3 percent in 2015. However, importation of machinery increased pushing its contribution of total imports to 21.4 percent from 17.9 percent in 2015. Importation of fuel remained fairly static at 14.2 percent of total imports from 15 percent in 2015 – most notably however, in October, fuel imports represented 17.1% of total imports, the highest level since December 2014,”KNBS explained.
However, exports in 2016 declined marginally by 1.3 percent compared to a growth of 6.2 percent growth in 2015.
Food and beverage exports improved by the largest margin last year contributing to 46 percent of total exports from 42 percent.
Analysts at Standard Investment Bank see a weaker trade balance in 2017 due to a prolonged dry season piling pressure on tea, coffee and flower output.
“Kenya’s trade balance, and therefore currency performance, remains heavily exposed to imports, especially given lackluster exports performance. Weakening of the trade balance is likely to result in more adverse currency movements triggering increased likelihood of policy tightening,” SIB noted.