The Central Bank of Kenya (CBK) expects Kenya’s Current account deficit to hit a five-year high as the country’s imports outstrip the gains made in horticulture and tea exports.
The deficit as a percentage of GDP is expected to widen to 5.6 per cent this year, mainly as a result of higher oil prices, CBK notes in its latest economic outlook data.
Cumulative 12-month oil imports hit $5.4 billion (KES 661.2 billion) in September, nearly double the $2.9 billion (KES 355.1 billion) spent in the same period last year.
It is followed by machinery and transport equipment, whose value for the period increased to $4.3 billion (KES 526.5 billion) from $4.2 billion (KES 514.3 billion).
According to the report by CBK, the country also spent $3.6 billion (KES 440.8 billion) to import manufactured goods up from $3.5 billion (KES 428.6 billion), and chemicals, $3.4 billion (KES 416.3 billion), up from $2.8 billion (KES 342 billion).
The high imports are evidenced by the rise in vessels calling at the Port of Mombasa in the wake of an easing global supply chain, after reduced activities during the Covid-19 pandemic and the onset of the Russia-Ukraine war.
Kenya Ports Authority (KPA) has reported a high number of ships calling at Mombasa, with at least 34 expected between yesterday and Friday next week.
These are mainly bringing in containerised goods, bulk steel products, coal, resin chips(used in the packaging industry), palm oil, sorghum, vegetable oil, used motor vehicles, and petroleum products.
The rise in vessels number comes amid a drop in freight costs which have eased this year. The global container freight rate index of a 40 feet container is currently at an average of $3,502, down from highs of $11,000 in August last year.
The deficit, albeit, is a lower revision from an earlier projection of 5.9 per cent.
“It is projected at 5.6 percent of GDP in 2022 compared to 5.9 percent previously estimated, on account of improved receipts from service exports and resilient remittances,” CBK governor Patrick Njoroge said in his post-Monetary Policy Committee briefing last Thursday.
This, however, still piles pressure on the shilling, which remains weak against the dollar, amid high demand by importers.
The local currency, which has been on a losing streak against the dollar fell to a record low of 122.70 a week ago, before slightly gaining, opening at 122.33 yesterday.
China and India remained the country’s biggest import sources, as the Asian market accounted for 65.7 per cent of the country’s total import bill.
The value of imports from China increased to KES 441.4 billion, up from KES 361.4 billion, while those from India were valued at KES 230.9 billion, up from KES 188.6 billion the previous year.
Read also; CBK Assures of Adequate Forex Reserves Despite Falling Below Minimum Target.
