•Tea and horticultural commodities were the key drivers in the growth of exports.
•As receipts from exports increased, the country managed to cut spending on imports by at least 1.6 per cent.
Kenya’s current account deficit narrowed from Sh206.2 billion in the second quarter of 2022 to Sh138.7 billion in the second quarter of 2023, official data indicates.
This was on the back of an improvement in the balance on merchandise trade, whose deficit reduced from Sh365.8 billion in the previous year, to a deficit of Sh343.2 billion this year.
According to the Kenya National Bureau of Statistics-Quarterly Balance of Payments data, the narrowing was attributable to a 9.6 per cent increase in exports of goods, coupled with a slight reduction in expenditure on imported commodities during the quarter under review.
Tea and horticultural commodities were the key drivers in the growth of exports.
The surplus from exports of services rose by 25.6 per cent to Sh35.4 billion in the second quarter of 2023.
Increased exports of services across the major categories namely; travel, transport, financial, telecommunication and government goods and services resulted in the favorable performance in international trade in services, KNBS added.
Inflows of diaspora remittances rose from Sh120.3 billion in the second quarter of 2022 to Sh140.5 billion, boosting the surplus in the secondary income account by 28.2 per cent, to Sh234.5 billion in the second quarter of 2023.
The financial account net inflows on the other hand rose from a surplus of Sh 199.8 billion to a surplus of Sh321.4 billion in the same quarter of 2023, largely on account of increased disbursements to general government from multilateral sources.
“ This resulted into a build up of reserve assets by Sh150.2 billion leading to an improvement in the overall balance of payments position to a surplus of Sh152.9 billion during the quarter under review,” KNBS said in its report.
During the period under review, the country recorded an improvement in the trade balance from a deficit of Sh429.8 billion in second quarter of 2022, to a deficit of Sh397.8 billion.
As receipts from exports increased, the country managed to cut spending on imports by at least 1.6 per cent.
“The growth in exports were largely supported by increased domestic exports of tea, horticulture, coffee, and iron and steel in the quarter under review,” KNBS said.
On the other hand, the decline in import expenditure over the same period was primarily due to decrease in imports of petroleum products, iron and steel, industrial machinery and, animal and vegetable oils.
Earnings from domestic exports in the second quarter of 2023 exhibited an increase of 6.8 per cent from Sh170.5 billion in the corresponding quarter of 2022.
This was mainly contributed by increases in earnings from domestic exports of horticultural products, tea, lubricants, and edible products and preparations.
Revenue from domestic exports of horticultural products grew by 19.1 per cent in the quarter under consideration from Sh39.4 billion recorded in the second quarter of 2022.
The Kenya Kwanza government has identified value addition as part of its strategies to cut exports of raw material and increase finished goods to boost earnings.
The government is also keen to grow local industries with a target of the domestic market, to cut reliance on imports.
During the second quarter of 2023, expenditure on imports declined to Sh647.0 billion from Sh657.3 billion in the same quarter of 2022, reflecting a decline of 1.4 per cent.
The decline was largely occasioned by decrease in imports of petroleum products from Sh168.3 billion to Sh148.8 billion.
Similarly, import expenditure on animal and vegetable oils declined from Sh42.7 billion to Sh31.9 billion during the review period.
In addition, other commodities whose import value declined were electrical machinery and apparatus (50.9%), textile yarn, fabric, and related products (20.6%) and plastics in primary and non-primary forms (12.1%).
That of motorcycles and cycles fitted with auxiliary motors dropped 61.7 per cent, aircraft, associated equipment and parts (61.0%) and iron and steel (7.1%).
Conversely, expenditure on imported rice rose more than two-fold from Sh9.4 billion in 2022, to Sh27.0 billion in the second quarter of 2023.
That of imported chemical fertilisers went up from Sh7.9 billion to Sh12.7 billion.
Similarly, over the same review period, the value of imported edible products and preparations; and second-hand clothing increased by 77.2 per cent and 57.9 per , to Sh7.2 billion and Sh7.1 billion, respectively.
Under the Broad Economic Category (BEC) classification, expenditure on importation of food and beverage commodities registered the highest growth from Sh67.1 billion to Sh94.4 billion in the same quarter of 2023.
“Expenditure on non-food industrial supplies, and fuel and lubricants continued to account for the bulk of the import bill, accounting for 59.0 per cent of the total import bill, inspite of exhibiting declines in the quarter under review,” KNBS said.