Kenya’s trade deficit narrows to four-year-low

The value of imbalance in Kenya’s trade with the rest of the world was the smallest since Sh317.32 billion in the first quarter of 2021.

This came in a period when expenditure on fuel shipments from the Middle East fell by nearly a fifth (19.10 percent) to Sh137.19 billion compared with Sh169.59 billion in the same period of 2024, reflecting falling oil prices in the international market.

Global crude oil prices generally fell during the review period, prompting Kenya to successfully push for lower premiums charged by its three Gulf-owned suppliers to ensure that consumers get some relief.

Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company — which sell to local oil marketing companies in shillings — agreed to reduce petroleum prices by as much as 14 percent per tonne in an extended fuel supply deal with Kenya earlier in the year.

Reduced expenditure on fuel by about Sh32.40 billion helped lower the total cost of imports into the country by 4.66 percent to Sh647.58 billion in the three months, partly helped by a stronger shilling against the US dollar.

The value of food and beverages ordered from abroad also helped cut the country’s import bill after falling 30.32 percent to Sh57.92 billion in the review period.

Expenditure on shipments of non-food industrial supplies and machinery, however, grew by 7.5 percent to Sh252.23 billion and 13.38 percent to Sh89.58 billion, respectively.

Kenya has over the years struggled to sustainably narrow the goods trade deficit, partly due to reliance on traditional farm produce exports such as tea, horticulture, and coffee which are largely sold raw, fetching relatively lower earnings.

The KNBS data shows earnings from exports and re-exports dropped 7.26 percent in the first quarter to Sh275.46 billion from Sh297.03 billion a year ago.

The reduction was the first in six years, gaoing back to 2019 when they contracted 2.99 percent to Sh156.87 billion.

Earnings from exports of food and beverages fell 10.53 percent to Sh103.78 billion, while sales of non-food industrial supplies to foreign countries generated Sh58.71 billion in the three months—5.67 percent less than Sh62.23 billion in the prior year.

Tea sold abroad fetched the country Sh46.08 billion between January and March, the provisional data collated by KNBS indicate, a considerable 20.23 percent fall over Sh57.77 billion a year ago, partly reflecting the strengthening of the shilling against the dollar. Coffee exports, on the other hand, surged by more than half (51.51 percent) to Sh15.66 billion from Sh7.60 billion.

Most Kenyan traders export produce raw because of higher taxes slapped on semi-processed or processed products in destination markets like Europe, fearing that value-added goods will attract tariffs and make the consignments less competitive in the global markets.

Kenya is among African countries pushing for full implementation of the African Continental Free Trade Area (AfCFTA) to ease reliance on Western markets which charge tariffs on value-added imports from the continent.

AfCFTA is expected to facilitate the free movement of goods, services, and labour in a market of nearly 1.5 billion people and a gross domestic product of about Sh3.4 trillion.

“If protectionism grows, Africa will suffer. Africa accounts for three percent of global trade and trade amongst African countries is still low,” Rifat Hisarcıklıoğlu, chairman of ICC World Chambers Federation (WCF), said in Nairobi on April 9.

“I support African Continental Free Trade Area (AfCFTA) because it … creates a huge market. I call on African governments and champions of commerce to make this great agreement work faster.”

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