A drop in value of imports amid a rise in exports helped push down Kenya’s trade deficit 15 percent in 2016, according to new economic data.
The country’s trade deficit declined to Sh855 billion (US$8.3 billion) from Sh1 trillion (US$9.8 billion) in 2015 on account of low import bill.
The imports, according to the Kenya National Bureau of Statistics (KNBS) data, fell 9.4 percent to Sh1.4 trillion (US$13.4 billion) from Sh1.6 trillion (US$15.5 billion) mainly due to low oil prices in 2016.
On the other hand, domestic exports increased slightly by 0.5 percent to Sh505 billion (US$4.9 billion) from Sh494 billion (US$4.8 billion) mainly attributed to increased volumes amid rise in prices of tea, horticulture and coffee.
The three accounted for 46 percent of the country’s total exports in 2016 compared to 45 percent in 2015, the highest level in six years.
During the period, the total value of fuel and lubricant imports declined by 12 percent to slightly above Sh206 billion (US$2 billion) to account for only 14.5 percent of the total import bill, compared to 15 percent in 2015.
This was a notable improvement from a high of 27 percent in 2011, with the fall being attributed to the low global oil prices in 2016.
The oil import bill, according to the economic data, averaged Sh115.4 billion (US$150 million) a month last year from a peak of Sh45 million (US$437 million) in July, 2014.
The drop pushed down Kenya’s monthly oil import bill to a level witnessed about a decade ago, but the oil prices are currently on the surge again.
On the other hand, the value of transport equipment imports dropped by seven percent to account for 9.8 percent of the total import bill, compared to 17 percent in 2015, partly attributable to the stability of the shilling during the year, analysts noted.
Of the major imports, only the value of construction and machinery equipment increased with the surge arising from the ongoing infrastructure projects in Kenya, which include the standard gauge railway.
Construction imports increased by 9.9 percent to Sh308 billion (US$3 billion) from Sh278 billion (US$2.7 billion) in 2015, accounting for 22 percent of the total import bill compared to 18 percent in 2015.
“The increase in construction machinery equipment is partly attributable to the continued investment in the infrastructure, which is supportive of developments especially in the real estate sector,” said Cytonn, a Nairobi-based Investment firm.
During the period, most of the imports came from China, the United States and India as in the past years, while exports went to Uganda, Pakistani and Britain, with the Asian nation being a newcomer.
The declining trade deficit, according to Cytonn, is key in supporting the Kenyan shilling to remain within stable levels, although the currency remains exposed to external factors such as the recovery of global oil prices, and weak tea and coffee prices, which are Kenya’s main exports.
Last week, the Kenya shilling declined 0.5 percent against the US dollar to close the day at 103 mark following increased pressure from oil importers.
“Going forward, the trade balance is likely to remain stable given that the import activity is likely to decline as we have observed in early 2017, due to the weakening shilling and tight liquidity in the market limiting the access of credit by traders,” said Cytonn.