Economy
The current account deficit drops to a 7-year low on steady imports
Thursday, July 13, 2023
Graphic | Stanislaus Manthey | NMG
Kenya’s current account deficit narrowed for the first quarter to the lowest level in seven years due to increased service receipts and a flat import bill.
A current account deficit indicates that a country is importing more than it is exporting.
The balance of payments report for the quarter ending in March from the Kenya National Bureau of Statistics shows that the country’s current account deficit narrowed to NIS 84.9 billion from NIS 139.3 billion recorded in the same period last year.
The Balance of Payments is a record of all economic transactions that occurred during a given period. It consists of five major components, with the current account being the largest.
The current account, which represents the trade balance for goods and services, remained on the deficit side given that the country is a net importer with a goods trade deficit of Sh303.6 billion in the three months.
Fast-growing revenue from travel accounts combined with faster growth in export earnings reduced the deficit to the lowest level for the period since 2016 when it stood at Sh43.4 billion.
“During the first quarter, export earnings posted faster growth in tea, iron and steel and better titanium revenues compared with slower growth in total import spending,” KNBS said in the report.
During the period, the services account registered a growth of 13.6 per cent to Kshs 56 billion in travel revenue as a result of tourism and other services expanding to Kshs 40.3 billion.
The total trade deficit narrowed by Sh27.7 billion as exports grew by Sh24.8 billion to a record high of Sh232.6 billion as Uganda remained the largest single market for Kenyan goods.
Uganda imported goods worth Sh31.2 billion, followed by the Netherlands with Sh17.9 billion and the United States with Sh15.1 billion.
Spending on imports shrank by Sh2.9 billion to Sh357.1 billion, even as the local currency weakened by seven percent against the US dollar, making imports more expensive.
The total balance for the period was recorded at Sh127.8 billion, with both the capital and financial accounts having a surplus of Sh6.9 billion and Sh111 billion respectively.
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