Kenya’s goods trade deficit has widened in the early months of the year largely on the back of a recovery in orders for machinery and industrial raw materials from foreign countries, official data shows.
The deficit – an economic condition when a country imports more goods than it exports – widened to Sh525.47 billion in the first four months of the year from Sh492.55 billion a year ago, according to data collated by the Kenya National Bureau of Statistics (KNBS).
This is in contrast to a year ago, when the gap narrowed by 3.45 percent on flattening of growth in imports after traders and companies cut orders for raw materials and machinery, among other capital goods.
Such goods are largely used in the productive sectors of the economy such as manufacturing.
The data, however, shows a 15.21 percent growth in expenditure on imports to Sh915.43 billion in four months through April this year, a climb from a measly 0.98 percent rise in the corresponding period last year, when traders battled a sustained weakening of the shilling against the US dollar.
The growth in imports in the review period was, nonetheless, slower than earnings from exports which bumped nearly a third (29.12 percent) to Sh389.95 billion, majorly powered by increased orders for tea.
This helped moderate the widening of the export-import gap which was slower at 6.68 percent compared to 21.38 percent in 2022.
The increased value of goods imports was largely driven by a rebound in orders for machinery and other capital equipment as well as industrial supplies which are chiefly semi-processed raw materials used by Kenyan factories.
The KNBS data shows expenditure on machinery and related equipment recovered to grow more than half (57.70 percent) to Sh111.84 billion in the four months.
This was a rebound from a 39.61 percent contraction in a similar period last year to Sh70.92 billion.
The import bill was further lifted by an 8.34 percent rise in non-food industrial supplies to Sh314.07 billion, a turnaround from an 18.06 percent fall in the same period last year to Sh289.90 billion.
The rise in expenditure on goods ordered from abroad, also came at a time when the shilling exchanged at an average of 145 units to the US dollar compared with 128 levels in the four months of 2023, a depreciation of 13.2 percent.
A weakening shilling means importers spend more to ship in goods from other countries.
Kenya has over the years struggled to sustainably narrow the 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.
The KNBS data shows income from tea exports climbed nearly two-thirds (65.43 percent) to Sh75.10 billion in the four months ended April on increased orders from destinations such as Pakistan and Egypt.
Earnings from coffee sold abroad were largely flat, falling marginally at 0.09 percent to Sh11.52 billion.
Most Kenyan traders export produce raw because of higher taxes slapped on semi-processed or processed products in destination markets like Europe, fearing that value addition will make exports less competitive in the global markets.
