Tools, fuel imports link in Kenya’s trade deficit
Containers with various imported goods at the port of Mombasa ready to be ferried to various destinations. Kenya’s trade deficit grew by a third in December driven by higher fuel and machinery imports even as earnings from exports rose marginally.
Kenya’s trade deficit grew by a third in December driven by higher fuel and machinery imports even as earnings from exports rose marginally.
This has pushed the country’s total trade loss for the year, which had hit Sh1.2 trillion in the 11 months to November, up to Sh1.36 trillion in 2021—a record high.
Data from the Kenya National Bureau of Statistics (KNBS) shows Kenya’s trade deficit increased 32 per cent as imports shot up to Sh235.23 billion in December while exports increased slightly to Sh66.35 billion.
The Sh168.88 billion trade deficit in the month is a significant jump from the Sh127.6 billion deficit in November when imports hit Sh191.81 billion as exports stood at a modest Sh64.21 billion.
“Domestic exports by Broad Economic Category (BEC) indicated that food and beverages were the main export category in December 2021 accounting for 43.79 per cent of the domestic exports, while non-food industrial supplies accounted for 26.74 per cent of the domestic exports,” KNBS said.
Machinery drove imports accounting for 25 per cent of all the goods shipped into the country in December, while fuel and lubricants and other capital equipment made up 17 per cent and eight per cent share of imports, respectively.
Food and beverages
Meanwhile, food and beverages accounted for 7.04 per cent of the total imports last December.
The increased imports have been spurred by easing of international travel restrictions, which have opened global shipping lines as countries de-escalate Covid-19 containment measures.
However, the higher import bill on increased fuel and machinery prices have further depleted Kenya’s foreign exchange reserves that now significantly rely on an influx of diaspora remittances, further weakening the local currency versus world majors.
Downward spiral
KNBS data shows the shilling has been on a downward spiral in recent months against the dollar, hitting an average of Sh112.91 against the greenback in December in contrast to Sh110.59 in December 2020.
Data from the Central Bank of Kenya shows forex reserves’ continued depletion this year, significantly reducing to $8,196 million on February 10 from $8,715 on January 20.
