Kenya's trade deficit increased by Sh20 billion in the first quarter of 2024, according to data from the Kenya National Bureau of Statistics (KNBS).
This caused the balance of payments to widen from Sh110.5 billion in the first quarter of 2023 to Sh131.2 billion in the first quarter of 2024.
The KNBS attributed the widening gap to higher spending on key imports such as petroleum, industrial machinery and air transport equipment.
A 28 per cent increase in export earnings from tea and horticulture produce, which pushed merchandise exports to Sh298.4 billion, was insufficient to bridge the deficit.
Merchandise imports rose by 17.9 percent on a free on board (FOB) basis, hitting Sh640 billion.
FOB is a term used in international shipping and includes delivery costs up to a specified point covered by the seller.
The growing trade deficit suggests a reduction in the country's ability to create jobs locally and support its currency.
“Net income from services registered a notable decline during the period under review from Sh40.7 billion in the first quarter of 2023 to Sh26.4 billion in the first quarter of 2024. This was observed across exports of the majority of the service categories which declined during the review period,” KNBS said in the Q1 2024, report.
Domestic export earnings increased by 19.5 percent, but imports grew by 16.0 percent to Sh684.0 billion in the first quarter of 2024 compared to the same period in 2023.
The rise in exports was mainly driven by tea and horticultural products, which increased by Sh30.6 billion.
Other significant exports included articles of apparel, clothing accessories, and essential oils.
However, earnings from titanium ores and concentrates more than halved due to decreased export quantities.
The Broad Economic Category (BEC) classification revealed that food and beverage commodities accounted for 45.6 percent of total revenue from domestic exports.
On the contrary, expenditure on imported chemical fertilisers and unmilled wheat declined from Sh32.1 billion and Sh26.9 billion to Sh9.7 billion and Sh19.3 billion.
Non-food industrial supplies made up the largest share of the import bill at 34.3 per cent in the review period.
Spending on fuel and lubricants was Sh173.8 billion, a 19 percent increase from the first quarter of 2023, making up 25.4 percent of the total import bill.
Total exports in the first quarter of 2024 grew by 28 per cent, rising to Sh298.4 billion from Sh232.7 billion in the same period in 2023.
Africa remained the largest market, accounting for 38.3 per cent of export earnings.
Key markets included Egypt (up 45.7 per cent), Democratic Republic of Congo (up 56.0 per cent), Tanzania (up 18.0 per cent), Uganda (up 7.4 per cent), and South Sudan (up 25.7 per cent).
Significant exports included tea to Egypt, wheat flour to the Democratic Republic of Congo, and washing machines to South Sudan.
Exports to Asia were valued at Sh42.7 billion, a 76.4 per cent increase, driven by higher exports to Saudi Arabia and the United Arab Emirates.
This included tea to Saudi Arabia and goat meat to the UAE. However, exports to Iran declined by 45.5 per cent due to reduced tea exports.
In Western Europe, exports to the EU increased by 39.9 per cent, with significant growth in cut flowers, avocados, and kerosene type jet fuel to the Netherlands.
Revenue from exports to the UK rose from Sh 13.5 billion to Sh 19.0 billion, boosted by tea and cut flowers.
Exports to America increased by 46.7 per cent to Sh 23.6 billion, with notable re-exports of kerosene type jet fuel to the USA.
Import expenditure rose by Sh 94.2 billion in the first quarter of 2024.
Asia accounted for 64.2 per cent of the import bill, valued at Sh439.0 billion, driven by increased imports from Malaysia, Pakistan, and China.
Imports from the Middle East dropped by 13.9 per cent to Sh 126.1 billion due to reduced imports of fertilisers from Saudi Arabia and gasoline from the UAE.
Imports from the EU grew by 51.9 per cent, with notable increases in imports from Belgium and the Netherlands.
Import expenditure from Russia fell by half, primarily due to decreased imports of wheat and fertilisers.
Imports from Africa rose by 14.8 per cent to Sh72.0 billion, with significant increases from South Africa and Tanzania.
The American continent saw import expenditures more than double to Sh 65.1 billion, largely driven by increased imports from the USA.
In the period the Kenyan economy slowed by 0.5 percent to 5 percent in quarter one of this year, weighed down by decelerating growth in the construction as well as transportation and storage sectors.
Similarly, transportation and storage sectors slowed to 3.8 percent compared to 6.6 percent during the review period.
“Electricity and Water Supply sector recorded a decelerated growth of 2.4 per cent in the first quarter of 2024 compared to a growth of 3.7 per cent in the corresponding quarter of 2023.”
However, agriculture, forestry, and fishing activities grew by 6.1 percent, followed by real estate (6.6 percent), financial and insurance (7 percent), information and communication (7.8 percent), and accommodation and food services (28 percent).
“Similar to the first quarter of 2023, agricultural production was vibrant in the corresponding quarter of 2024, owing to favourable weather conditions that supported crop and animal production during the quarter,” the report continues.