Rebound in importation of machinery and transportation equipment, including railway locomotives, helped reverse Kenya’s narrowing trade goods deficit in the first half of the year, official data shows.
Data collated by the Kenya National Bureau of Statistics (KNBS) shows the deficit widened a marginal 1.22 percent to Sh765.02 billion in the six months to June.
The country's trade deficit--the gap between the value of exports and imports-- had narrowed by 7.15 percent to Sh755.81 billion in a similar period last year.
Expenditure on imports, the KNBS data, indicates grew 8.23 percent to nearly Sh1.34 trillion, while total exports, including re-exports, rose by a fifth (19.28 percent) to Sh571.59 billion.
“The increase in imports has been driven by machinery and transport equipment, although also the appreciation of the shilling has also helped to incentivise importation of goods,” Central Bank of Kenya (CBK) Governor Kamau Thugge said Wednesday.
“For exports, we have higher prices and also larger volumes of tea auctions and, therefore, we expect the tea sector to perform positively this year.”
Increased expenditure on transportation equipment and machinery signals growing investment in the production of goods and services relative to the last year when orders for capital goods went down.
The value of transportation equipment ordered from foreign countries posted the highest growth, jumping 63.45 percent to Sh110.50 billion, partly helped by orders for locomotives for the Standard Gauge Railway (SGR) line. Kenya Railways Corporation last month received 20 passenger locomotives for use on the Nairobi-Mombasa SGR line.
The KNBS data puts the value of machinery and related equipment at Sh167.22 billion in the six months ended June 2024, a bump of 28.93 percent over Sh129.70 billion a year ago.
This came at a time when the pressure on the shilling eased compared to last year, while access to dollars also improved. The shilling averaged 140.27 units against the dollar in the half-year period, 6.54 percent weaker than the average of 131.66 units in the same period in 2023.
The shilling hit a historic low of Sh161 against the US dollar in January, according to official rates published by the CBK, before regaining ground from mid-February to trade at prevailing rates of about 130 units to the greenback.
Kenya has over the years struggled to narrow its goods trade deficit partly due to reliance on traditional farm produce exports such as tea, horticulture, and coffee which are largely sold raw, fetching relatively lower earnings. A persistently higher trade deficit, economists say, slows down creation of new job opportunities for the growing skilled youth as most revenue earned within Kenya is spent on buying goods from foreign countries, thereby raising production and job openings in source markets.
A widening import-export gap also piles pressure on the shilling as the demand for dollars outstrips the supply. Income from tea exports, Kenya’s largest export, increased 17.75 percent to Sh102.47 billion in the January-June period compared with a year ago.
Earnings from coffee, however, declined 9.48 percent to Sh19.26 billion, according to the KNBS data.
“The volumes of vegetable exports have increased quite significantly at 86.3 percent, the fruits and nuts have increased 12 percent, but cut flowers have declined. Overall, horticulture volumes have increased 33 percent,” Dr Thugge said of the performance for key exports in the half-year period.
