Deficit falls as Kenyans spend less on imports

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Deficit falls as Kenyans spend less on imports

Goods at the port of Mombasa. FILE PHOTO | NMG 

Kenyans cut their appetite for foreign goods in the first six months of the year, reducing the trade deficit by Sh567.89 billion.

Expenditure on imports dropped by Sh27.85 billion or 3.1 percent (year-on-year) to Sh871 billion in the first half of the year, according to data from the Kenya National Bureau of Statistics (KNBS).

For instance, spending on imported clothes, furniture and beddings dropped by Sh976 million in the six months to June compared to a similar period a year earlier.

China and India remain Kenya’s largest source of imports, accounting for Sh141.82 billion, or 31.52 percent of total import bill in the six months through June, and rising to 39.33 percent of non-oil orders.

According to the KNBS data, earnings from exports also contracted by Sh16.7 billion to stand at Sh303.31 billion in the same period.

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This narrowed the trade deficit marginally by 1.93 percent in the first half of 2019 compared with the same period a year earlier.

The deficit – the gap between imports and exports – dipped to Sh567.89 billion in the January-June period from Sh579.05 billion in the first half of 2018.

Shipments of industrial machinery and metals into Kenya dropped by Sh19 billion in the six months to June, reflecting a cooling of economic activity.

Machinery imports dropped by Sh13.9 billion, iron and steel (Sh5.1 billion) while agricultural machinery like tractors were down Sh912 million.

The slowdown in industrial spending works against Kenya’s quest to rev up its manufacturing for growth and jobs creation. The sector has stagnated at 10 percent of the gross domestic product for the past 10 years, despite previous government efforts to put the economy on the path to industrialisation by 2030.

Kenya’s economy grew by 5.6 percent per cent in the second quarter of the year under review, down from expanding 6.4 percent in the same period a year earlier.

A flat growth in exports suggests a difficult operating environment for domestic enterprises, hurting income and job opportunities.

Kenya’s main exports are agro-based such as tea, horticulture and coffee which are usually prone to shocks largely as vagaries of weather and a glut in international markets, which reduces prices.

A persistently higher trade deficit, economists say, slows down the creation of new job opportunities for the growing number of graduates as most revenue earned in Kenya is spent on buying goods abroad, boosting foreign factories.

Sachen Gudka, who chairs the Kenya Association of Manufacturers, said enhanced power and tax incentives for factories producing clothing, iron and steel products can help ease pressure on Kenya’s import bill.

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