Kenya’s trade deficit plunges Sh205bn on lower imports

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In 2020, Kenya’s trade deficit decreased by 16.97 percent, or Sh204.57 billion assisted by a double-digit decline in imports as a result of the Covid-19 restrictions ad shutdowns that affected the global supply chains.

According to provisional statistics by the Kenya National Bureau of Statistics (KNBS), the trade deficit dropped to Sh1.001 trillion in 2020 compared to nearly Sh1.21 trillion in 2019.

In 2020, the total exports shot up by 7.77 percent to Sh641.21 billion whereas the value of imports dropped by 8.81 percent or Sh158.74 billion to Sh1.64 trillion.

The nosedive in the value of imports was aided by Sh103.78 billion, or 31.42 percent, a decline in expenditure on petroleum products imports to Sh226.53 billion.

Besides, the orders for machinery and other capital goods also shrank Sh45.62 billion to Sh278.91 billion.

Earnings from key farm exports such as tea reported growth, tea exports grew by 14.81 percent in 2020 yet horticultural produce receipts decreased slightly.

The horticultural sales plunged sharply in the first half of the year when flight capacity due to the international ban on passenger flights leading to a 1.95 percent drop in the annual sales to Sh141.75 billion in the face of recovery in the second half of the year.

The cut flower and vegetable sales abroad decreased by 1.98 percent and 19.71 percent, respectively to Sh102.8 billion and Sh21.88 billion.

However, the earnings from fruit exports increased to Sh17.8 billion in 2020 representing a 34.97 percent or Sh4.61 billion increase.

The decrease in orders for goods from abroad contributed to the current account deficit to a low of 4.8 percent of gross domestic product (GDP) in 2020.

According to the Central Bank of Kenya, in January 2020 ascribed it to “savings from lower oil import bill, the strong performance of agricultural exports and resilient remittances”.

The shrinking of the trade goods deficit, which elongates to the current account, assists in easing the pressure on the Kenyan Shilling which had reached 109.17 units, a 7.18 percent depreciation.

The CBK governor Patrick Njoroge predicts that the current account deficit to drift around 5.1 percent of GDP in 2021 and hold steady around five percent in the medium term.


About Author

Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: Contact: +254 780216631

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