Kenya’s trade deficit surges to Sh1.2 trillion on fuel and industrial imports

Kenya’s trade deficit in the 11 months to November 2021 grew to a record Sh1.24 trillion, widened by a surging fuel and industrial goods import bill.

The economic recovery recorded last year as the country came out of the worst of the Covid-19 restrictions boosted demand, allowing factories to resume production that had been stunted in 2020.

The movement restrictions imposed by many countries around the world during the peak of the pandemic also disrupted trade and supply chains, resulting in pending supply issues that are now being unwound as international borders fully reopen.

The Kenya National Bureau of Statistics said total imports rose by 29 percent or Sh430 billion to hit Sh1.91 trillion, outperforming exports that rose by a more modest Sh89 billion or 15 percent to Sh672.6 billion.

This wider trade deficit is a concern for the country’s forex position, with importers drawing out valuable dollars that would otherwise be providing backing for the under-pressure shilling.

Rising crude prices meant that fuel import costs increased by the highest margin of 61 percent among the major import categories, ahead of non-food industrial imports at 31 percent, transport equipment at 25 percent and food at 24 percent.

The cost of a barrel of crude oil rose from $51.50 in January to $84 in November last year, pushing the country’s fuel and lubricant import bill higher by Sh125.89 billion to Sh332.1 billion.

Industrial supplies imports rose by Sh176.1 billion to Sh753.3 billion, entrenching their position as the largest item in the country’s import bill.

On the export side, food and beverage products, which constitute the largest export items, recorded a lower growth compared to other major import categories.