Current account deficit narrows to 5.2pc in May

Central Bank of Kenya (CBK). FILE PHOTO | NMG Kenya’s current account deficit narrowed to 5.2 per cent in the 12 months to May from 5.6 per cent in April, attributed to lower oil imports and improvement in exports of tea, horticulture and remittances.

The figure is below the projected current account deficit of 5.8 per cent of gross domestic product (GDP) by the end of the year. The Central Bank of Kenya (CBK) said last week a faster than expected recovery in key exports has raised the prospects of the deficit ending the year better than previously projected.

“Provisional data on the balance of payments shows that the current account deficit narrowed to 5.2 per cent of GDP in the 12 months to May 2020 compared to 5.6 per cent of GDP in the 12 months to April,” said the CBK in its latest weekly bulletin.

The improvement in the current account — which records the net of inflows from trade/cross-border investments and external payments — comes after it had gone up to 6.2 per cent in March due to a decline in horticulture export and tourism earnings due to the Covid-19 pandemic.

The pandemic led to reduced demand from the export destinations as countries placed lockdown measures to curb the spread of the virus.

The CBK has projected a significant rebound in the coming months as the major sectors begin to improve.

During Monetary Policy Committee meeting held on June 25, CBK Governor Patrick Njoroge said the exports of goods improved by 4.1 per cent in the period January to May 2020, mainly driven by tea, horticulture and re-exports.

The volume of tea exports increased by 23.5 per cent.

Export earnings increased by 14 per cent to Sh179.82 billion in the first three months to March compared to Sh157.75 billion in a similar period in 2019.

Receipts from tea and horticulture exports increased by 15.2 per cent and 22.7 per cent, respectively, in May 2020 compared to May 2019, the CBK said.

Remittances also recovered in May to Sh27.5 billion ($258.2 million) from Sh22.19 billion ($208.2 million) in April.

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