- This is the third-highest deficit in two years since 2018 when the country recorded a 5.8 per cent trade shortfall with international partners.
- The tourism sector is now looking up
Kenya’s current account deficit widened to 5.2 per cent in 12 months to November compared to 4.7 per cent the same period last year.
The weekly Central Bank of Kenya bulletin has attributed the higher deficit to lower service receipts as well as high imports, which more than offset increased receipts from agricultural exports and remittances.
This is the third-highest deficit in two years since 2018 when the country recorded a 5.8 per cent trade shortfall with international partners.
A deficit of 5.5 per cent recorded in May last year was the highest in three years.
A current account deficit occurs when a country spends more money on imports than it receives from its exports.
Kenya's current account deficit touched a decade peak of 7.2 percent of GDP in 2017 as the country dealt with election-related uncertainty.
The country has been witnessing shrunk earnings from the export market for the past 15 months on social-economic challenges brought about by the Covid-19 pandemic that saw international borders closed for close to four months last year.
This negated gains from the service sector account for almost 45 per cent of the country's gross domestic product.
Kenya's primary agricultural forex earners, tea and coffee suffered a major setback in the past 12 months after Covid-19 impacted negatively on demand for the commodities globally.
Going forward, the tourism sector which has was crippled by the Covid-19 pandemic in 2020 and early 2021 is likely to gain momentum and help in bridging the deficit.
According to the Ministry of Tourism, the sector showed recovery signs with international arrivals increasing 53.3 per cent, to 870,465, up from 567,848 in 2020.
The numbers almost doubled tourism earnings to Sh146.5 billion, up from Sh88.6 billion the previous year.
High imports and low exports continue to hurt the country's forex reserve which dropped to a four-week low of $8.715 billion or 5.33 months of import cover in the week ended January 20.
''This meets the CBK’s statutory requirement to endeavor to maintain at least four months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover,'' CBK said.