Kenya’s H1 current account gap widens to 4.5% of GDP

By bne IntelliNews October 1, 2015

Kenya’s first-half current account deficit widened to 4.5% of GDP from 3.1% in the same period last year because of worsened performance of the goods and services accounts, IntelliNews estimates based on data from the Kenya National Bureau of Statistics (KNBS) showed.

Kenya has seen a growth in imports, especially equipment and machinery, related to the stepped up rollout of infrastructure and energy projects. At the same time lower income from the country’s key exports such as tea, coffee and cut flowers, coupled with a decline in tourism earnings due to rise in insecurity have led to the enlarging of the current account shortfall. This has contributed to the sharp depreciation of the local shilling currency, which weakened by about 14% against the US dollar since the beginning of the year as investors’ appetite for emerging market assets has been swaying amid US rate hike and China-related restlessness.

In nominal terms, the H1 shortfall soared 61% y/y to KES252.7bn ($2.4bn), as the trade gap expanded by 8.6% y/y to KES449bn and the services surplus more than halved to KES48.4bn from KES104.4bn a year earlier. The widening of the trade gap was caused by a 3.8% y/y drop in exports coupled with a 3.7% y/y rise in imports, while the drop in the services surplus came on the back of a 153% surge in payment for services abroad.

Kenya’s gross official reserves depleted by KES64.7bn during the six-month period, compared to an accumulation of KES173.9bn in H1 2014, reflecting the central bank’s market interventions to support the stubbornly depreciating shilling, as well as interest payments on the $2bn Eurobond. As at September 24, the central bank’s usable foreign exchange reserves totalled $6.18bn, having narrowed by $1.25bn since the start of the year. Import coverage dropped to a multi-year low of 3.93 months from 4.85 months at the end of 2014.

KES bn H1 2015 H1 2014 y/y, % y/y, KESbn
CURRENT ACCOUNT BALANCE -252.7 -157.3 60.7% -95.4
Trade balance -449.0 -413.5 8.6% -35.5
-exports of goods (fob) 265.1 275.5 -3.8% -10.4
-imports of goods (fob) 714.2 689.0 3.7% 25.2
Services balance 48.4 104.4 -53.7% -56.0
-credit 140.8 141.0 -0.1% -0.2
-debit 92.5 36.6 152.7% 55.9
--Travel account 24.7 27.7 -10.9% -3.0
---credit 33.7 33.8 -0.2% -0.1
---debit 9.0 6.1 48.8% 3.0
Primary income -26.8 -20.4 31.6% -6.4
Secondary income 174.7 172.2 1.4% 2.5
-diaspora remittances 71.6 59.9 19.6% 11.7
Change in gross official reserves -64.7 173.9 n.a. n.a.
Source: KNBS        

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