Kenya’s trade deficit, the gap between export earnings and import costs, grew by Sh20.7 billion in the first quarter of 2024. Data from the Kenya National Bureau of Statistics (KNBS) reveals that the balance of payments increased from Sh110.5 billion in Q1 2023 to Sh131.2 billion in Q1 2024, driven by higher spending on key imports such as petroleum, industrial machinery, and air transport equipment.
Export earnings saw a significant rise, particularly from tea and horticultural commodities, leading to a 28% increase in merchandise exports to Sh298.4 billion in Q1 2024. However, this was not enough to offset the 17.9% increase in merchandise imports, which reached Sh640.0 billion on a Free On Board (FOB) basis during the same period.
FOB, a term used in international shipping, includes delivery costs covered by the seller up to a specified point. Despite the rise in exports, the trade deficit suggests a weakening ability for job creation and currency support within the country, according to KNBS.
Net income from services also registered a decline, dropping from Sh40.7 billion in Q1 2023 to Sh26.4 billion in Q1 2024. This decline was observed across most service export categories.
Domestic export earnings increased by 19.5%, while imports grew by 16.0% to Sh684.0 billion in Q1 2024 compared to Q1 2023. The rise in exports was primarily driven by tea and horticultural products, which increased by Sh30.6 billion. Other significant exports included apparel, clothing accessories, and essential oils. However, earnings from titanium ores and concentrates more than halved due to decreased export quantities.
Commodities under the food and beverage category accounted for the largest proportion of total revenue from domestic exports at 45.6% during the review period. There was a decline in export earnings of primary non-food industrial supplies, from Sh23.9 billion in Q1 2023 to Sh21.7 billion in Q1 2024.
In addition to higher spending on key imports, there was a notable increase in imports of aircraft, associated equipment, and parts, rising from Sh4.9 billion in Q1 2023 to Sh13.1 billion in Q1 2024. Conversely, expenditure on imported chemical fertilizers and unmilled wheat declined from Sh32.1 billion and Sh26.9 billion in Q1 2023 to Sh9.7 billion and Sh19.3 billion in Q1 2024, respectively.
Non-food industrial supplies continued to account for the largest share of the import bill, with a share of 34.3% in Q1 2024. Expenditure on commodities under the fuel and lubricants category amounted to Sh173.8 billion, representing a 19.3% increase from Q1 2023 and accounting for 25.4% of the total import bill.
Export Markets
Africa remained the largest market for Kenya’s exports, accounting for 38.3% of total export earnings in Q1 2024. This was supported by increased exports to Egypt (45.7%), the Democratic Republic of Congo (56.0%), Tanzania (18.0%), Uganda (7.4%), and South Sudan (25.7%). Notably, there were increased exports of tea to Egypt, wheat flour to the Democratic Republic of Congo, carboys and similar articles to Uganda, household washing machines to South Sudan, and re-exports of kerosene-type jet fuel to Tanzania.
Revenue from exports to Asia rose to Sh42.7 billion, a 76.4% increase from Q1 2023, primarily due to increased exports to Saudi Arabia and the United Arab Emirates. Exports to Iran, however, declined by 45.5% due to decreased tea exports.
In Western Europe, earnings from exports to the European Union increased by 39.9% in Q1 2024 compared to Q1 2023, driven by higher exports of cut flowers and avocados and re-exports of kerosene-type jet fuel to the Netherlands. Revenue from exports to the United Kingdom also rose from Sh13.5 billion in Q1 2023 to Sh19.0 billion in Q1 2024, boosted by increased exports of tea and cut flowers.
Exports to America amounted to Sh23.6 billion, reflecting a 46.7% increase from Q1 2023, driven by increased re-exports of kerosene-type jet fuel to the USA.
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