Strong May exports signal balance of payments hope

The Central Bank of Kenya (CBK) has struck a bullish tone on Kenya’s balance of payments, saying chances are high the current account deficit could come in below the 5.8 percent projection at the end of the year.

CBK governor Patrick Njoroge said the export numbers for May showed a stronger than expected recovery following the dip in April, led by tea and horticulture.

Remittances also went up in May, helped by higher inflows from South Africa and the US.

“The outlook on our balance of payments has improved relative to where we were a month ago. Exports of goods improved by four per cent in the period between January and May compared to a similar period in 2019, driven mainly by tea, horticulture and re-exports,” said Dr Njoroge on Friday in a post-Monetary Policy Committee briefing.

“We haven’t yet revised the current account deficit projection of 5.8 percent for the end of the year, but the indicators show there is an upside risk, due to the export and remittance trends.”

He said tea volumes were up 15.2 percent in May compared to the similar month last year, while horticulture shipments rose 33 percent.

Flower exports have also picked up as destination markets continue to open after Covid-19 lockdowns, going up 12.4 percent.

“In the first two weeks of June, we saw flower orders almost back to normal, hitting 95 percent of the volumes seen in the similar time frame in 2019,”said Dr Njoroge.

On the import side, the CBK said the numbers continue to be depressed due to reduced demand, and even though the price of oil has gone up to $43 a barrel from the low of $20 seen a few weeks ago, it is unlikely to approach the $70 levels that opened the year.

On the remittances, CBK said while there was a dip in April which some players expected would go on for some months, there was a rebound in May led by South Africa and the US.

Monthly remittances last month stood at $258 million (Sh27.5 billion), up from $208 million (Sh22.2 billion) in April.