Kenya’s current account deficit fell to its lowest level in four years during the second quarter of the year thanks to increased service revenues.
The current account deficit shows that a country exports less compared to what it imports.
The improvement in the deficit, explained by growth in exports of both goods and services, is an indication that the country is becoming increasingly self-reliant in domestic production of goods and services, which is crucial to maintaining a strong currency and low inflation.
The balance of payments report for the quarter ending June by the Kenya National Bureau of Statistics (KNBS) reveals that Kenya’s current account deficit narrowed to Sh104.05 billion from Sh158.98 billion recorded in the same period last year.
The report provides key economic insights, highlighting changes in Kenya’s current account, exports, imports, remittances and financial flows.
The balance of payments records all economic transactions that took place in a given period. It consists of five main components, the current account being the largest.
Kenya’s current account, which represents the trade balance of goods and services, registered a deficit since the country is a net importer with the merchandise trade deficit standing at Sh341.2 billion between April and June this year.
However, the improvement in the current account deficit was supported by increased exports of tradable goods, growth in net services exports and diaspora remittances.
“This resulted from marginal increases in exports of transportation and communications services, coupled with notable declines in imports across the majority of service categories,” KNBS notes in the report.
The total trade deficit narrowed by Sh19.24 billion as exports grew by Sh26.99 billion to Sh275.7 billion with the UAE emerging as the largest market for Kenyan goods.