Current account gap halves on exports and remittances
The Central Bank of Kenya headquarters in Nairobi in this picture taken on March 31, 2024.
Kenya’s current account deficit dropped by 50.6 per cent in the three months to June compared to a similar period last year, following an increase in the country’s diaspora remittances and export of both merchandise and services.
Latest data from the Kenya National Bureau of Statistics shows that the nation’s current account deficit dropped by Sh106 billion in the April to June 2024 quarter, to Sh104 billion from Sh210.7 billion a year ago.
Current account deficit measures the difference between the amount of money paid for imports or transferred abroad by Kenyans and that earned from exported goods and services or received from overseas. A deficit means that outward payments exceed inward earnings.
The drop, which is attributed to the growth of exports of both merchandise and services, means that the country is increasingly becoming self-reliant in terms of domestic production of goods and services, which helps maintain a strong currency and lower inflation.
“This improvement was supported by an increase in exports of merchandise goods from Sh249.1 billion during the second quarter of 2023 to Sh276.3 billion during the second quarter of 2024,” the data publisher said in a quarterly report.
Over the same period, there was also a rise in net export of services from Sh27.4 billion last year to Sh43.6 billion.
“This resulted from marginal increases in exports of transport and telecommunications services, coupled with a notable reduction in imports across the majority of the service categories,” KNBS said.
The drop in the current account deficit was also supported by a growth in diaspora remittances, which rose from last year’s Sh140.5 billion to Sh157.4 billion this year, an increase of 12 per cent.
Diaspora remittances now earn the country more foreign exchange than any of the top export commodities including coffee, tea, and horticulture, highlighting their significance in boosting the country’s current account balances.
During the quarter in question, tea exports saw a marginal rise of two per cent, while both coffee and horticulture dropped slightly compared to a similar quarter last year.
