High exports and low imports in the third quarter of 2018 saw the shilling start this year at 0.5 per cent higher compared to the same period last year.
According to the Balance of Payment Q3 report released by Kenya National Bureau of Statistics on New Year’s eve, total exports grew 3.9 per cent to Sh150.6 billion compared to Sh 145.0 billion recorded in Q3 of 2017. On the contrary, the value of imports dropped by 4.3 per cent to Sh 432.3 billion over the same period.
“The increase in value of total exports coupled by decline in the value of imports, resulted into narrowing of the merchandise trade deficit from Sh 306.7 billion in the third quarter of 2017 to Sh 281.7 billion in the same quarter of 2018,” KNBS said.
Decrease in the current account deficit was mainly driven by increased value of exports in goods and services as well as reduced value of food imports.
Merchandise trade balance improved to a deficit of Sh250 billion in the third quarter under review compared to a deficit of Sh279 billion dollars in the same period of 2017.
Africa remained the leading destination for Kenya’s exports, accounting for 35.9 percent of the country’s total exports followed by the European Union accounted for 19.7 per cent of total exports estimated at Sh29 billion.
Total exports to China, India and Japan increased by 62.4 per cent, 73.6 percent and 12.9 per cent respectively, indicating Kenya’s inroads to the Asian market.
The trade balance dynamics during the quarter favoured the shilling, which had come under siege in November, losing ground to the greenback, dropping to a low of 103.17 in mid-November.
On Monday, Central Bank of Kenya quoted the shilling at 101.84 compared to Sh102.35 on Jan 2, 2018, 50 basis points higher despite various analysts including the International Monetary Fund predicting doom for the shilling in October.
Global rating firm Fitch Solution in its study dubbed Africa Monitor- East and Central Africa predicted the shilling to close the year at 103.50 as demand for dollars by importers spikes during this festive season.
In a report in October following a review on Kenya’s economic health, the international lender said the shilling may be overvalued by up to 17.5 per cent adding that it risked being classified as “managed” rather than operating on the forces of demand and supply.
Kenya dismissed the report, with CBK governor Patrick Njoroge terming it as ‘black box’ analysis of shilling’s performance.