Kenya has a trade deficit, which means that the country imports more goods and services than it exports. In 2022, Kenya's trade deficit amounted to around $14.03 billion. This is a significant increase from the trade deficit of $8.01 billion in 2020.
The main reason Kenya’s trade deficit has increased significantly in the first quarter of 2023 is because of a high food import. Indeed, Kenya’s food import bill rises by 58.4%, with a deficit of KSh 7.3 billion between food exports and imports, according to Business Insider Africa.
Kenya's Trade Deficit, 2012-2022
Source: Central Bank of Kenya
The surge in food imports didn’t suddenly happen. It was an accumulation of continuous imports that deepened the trade deficit. In 2021, the country imported $2.5 billion worth of food, accounting for 12.7% of its total imports. The main food imports into Kenya are cereals, sugar, vegetable oils, and dairy products. As a matter of fact, Kenya has been in a trade deficit since 2012, as the data suggest. As a result, during that very same period (2012-2022), Kenya’s national debt increased dramatically from 39.8% to 67.3%. This is a 69% increase in public debt, according to the Central Bank of Kenya.
The surge in food imports is related to some important economic factors that put Kenya in an economic conundrum. Kenya has been experiencing a prolonged drought in recent years, which has led to crop failures and reduced agricultural output. This has increased the demand for imported food, especially cereals such as wheat and rice.
In addition, Kenya's population is growing rapidly, and this is putting pressure on the country's food supply. In order to meet the needs of the growing population, Kenya is importing more food.
And lastly, the Kenyan shilling has been volatile in recent years, and this has made imported food more expensive. This has led to some Kenyans switching to locally-produced food, but it has also increased the demand for imported food from those who can afford it.
The surge in food imports has had a number of implications for Kenya. First, the increased demand for imported food has pushed up prices, making it more difficult for some Kenyans to afford to eat. Second, the surge in food imports has hurt the domestic agricultural sector, as farmers have been unable to compete with cheaper imported food. Third, Kenya is now more vulnerable to food insecurity, as it relies more on imported food. All of these factors further deepen Kenya’s trade deficit.
While food import is the main factor that props up its trade deficit, it is, however, not the only factor that worsens it. Kenya imports a lot of goods and services, and the cost of these imports has been rising in recent years. This is due to a number of factors, including the rising price of oil and other commodities.
Kenya's exports have not been growing as fast as its imports, which has contributed to the trade deficit. This is due to a number of factors, including the global economic slowdown and the country's reliance on a few key export commodities, such as tea and coffee.
The trade deficit means that Kenya is losing foreign exchange, which can have a negative impact on the country's economy. Thus, the Kenyan government is forced to borrow more money to finance its trade deficit, which is increasing the country’s debt burden.