Kenya’s current account deficit surges to Sh66 billion - KNBS
The latest figures by the Kenya National Bureau of Statistics (KNBS) show the country’s current account balance widened by 58 per cent, rising to Sh66.6 billion from Sh42.1 billion during the same period last year.
Kenya faced a significant setback in the first three months of the year in efforts to balance its cash books and improve the country’s scope and position in external dealings.
The latest figures by the Kenya National Bureau of Statistics (KNBS) show the country’s current account balance widened by 58 per cent, rising to Sh66.6 billion from Sh42.1 billion during the same period last year.
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Ideally, the balance gauges a country’s spending on foreign goods, services and investments, compared to what it earns from its exports and income from abroad, such as remittances.
A widening deficit means the country is spending significantly more on imports, foreign debt interest payments, and other external obligations than it is earning from exports, remittances and investment inflows.
In other words, it means a country is heavily reliant on external funding and could become problematic if it leads to unsustainable debt levels.
For Kenya, the situation puts pressure on the local currency, as increased reliance on foreign borrowing may raise concerns among investors about the country's external balance and economic stability.
The deterioration in the country’s current account is mainly attributed to a Sh45.5 billion decline in net inflows in the secondary income account, which stood at Sh230.9 billion.
“The reduction in the secondary income account was largely due to an 11.0 per cent decrease in diaspora remittances to Sh161.0 billion in the quarter under review,” the Q1 BOP report reads.
The secondary income account is a component of the current account that records transfers of money where no goods or services are exchanged in return.
It includes income such as remittances, foreign aid and pensions received by individuals from countries where they previously worked.
On a positive note, Kenya’s merchandise trade deficit showed marginal improvement, narrowing from Sh313.3 billion in Q1 2024 to Sh306.1 billion in the period under review.
“This improvement was due to a slower decline of Sh40.9 billion in exports compared to a decrease of Sh48.2 billion in imports in absolute terms.”
The services account recorded a surplus of Sh82.3 billion, which is a marginal decline from a surplus of Sh83.8 billion in the corresponding quarter of 2024.
KNBS says this was mainly occasioned by a 7.4 per cent decrease in exports of services compared to a 9.8 per cent decline in imports of services in the period under review.
“The decline in services exports was largely attributable to reduced revenues from transport and financial services,” the report reads.
On the other hand, the net primary income account recorded a deficit of Sh73.8 billion, an improvement from a deficit of Sh89.0 billion in the same quarter of 2024.
This is attributed to reduced servicing of public debt during the quarter under review.
The primary income account tracks money a country earns from abroad or pays to other countries for things like wages, interest and dividends and profits from companies.
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