Kenya’s import-export gap widens, hits forex
Kenya’s imports triple export to Sh216 billion in March alone
The value of Kenya’s imports almost tripled that of export between February and March 2023, highlighting the persistent negative balance of trade that continues to drain a considerable chunk of the country’s forex reserves.
During the period, import value rose by 17.2 per cent to Sh216.43 billion while export value stood at just 81.74 billion, reflecting a marginal increase of 6.6 per cent, according to the latest data by Kenya National Bureau of Statistics (KNBS).
Exports value rose from the previous figure of Sh76.65 billion in February, reflecting an increase by just Sh5.09 billion which is, however, too low to offset the impact of the dollar outflow caused by the massive imports.
While KNBS did not state the precise products imported during that period, Kenya generally sources fuel, edible oil, machinery, iron, and cement among others from its major trading partners while exporting agricultural produce.
“The value of vegetables exported decreased from Sh1,947.72 million to Sh2576.61 million during the same period,” KNBS said in a statement. The decrease in the export of agricultural produce was also witnessed in the quantity of cut flowers and fruits which also narrowed downwards to 11,935 tonnes and 7,035 tonnes, respectively.
Higher export than import often widens Kenya’s current account – the difference between a country’s forex inflows and outflows – unlocking demand for the dollar which is useful in cushioning the shilling in the forex market.
The usable dollar reserves have dropped below the statutory requirement of at least four months of import cover, leaving the shilling in a free fall but the problem is also linked to multiple external shocks such as tightening of monetary policies.
President William Ruto’s Kenya Kwanza has been keen to increase exports in the short to medium term, by mainly supporting the production of the prioritised agricultural value chains, which are considered to bear the biggest impact on the depressed economy. National Treasury Cabinet secretary Njuguna Ndung’u told the Budget and Appropriations Committee last week that the government has adopted a value chain approach that will address the bottlenecks that impede the growth of exports and enhance the country’s competitiveness.
“This will entail revamping underperforming and collapsed export crops while expanding emerging ones (coffee, cashew nuts, pyrethrum, avocado, macadamia nuts)”.
The prioritised value chains include textile and apparel, edible oil crop production, dairy, leather and leather products, rice, and tea. Others are blue economy, minerals and tree planting, and construction and building materials.
Also being closely watched by the regime is the currently ongoing trade negotiations and renewing of bilateral ties with key allies to build broader foreign market access for its domestic products.
There is, for instance, the trade negotiation with the United States, European Union, and continued implementation of the African Continental Free Trade Agreement (AfCFTA) as the country looks to build export capacity.