Reduced export revenues and increased imports may push Kenya into using an insurance loan from the International Monetary Fund set up two years ago.
IMF is currently reviewing the credit facility and held 10 meetings with top officials last month, at a time when the country is faced with a wider balance of payments than anticipated.
Data from the National Treasury and Central Bank has been conflicting on how bad the burden of importing heavily is and the effect on the shilling’s stability.
Initially, Treasury put the current account deficit – the difference between exports and imports – at 7.7 per cent to February.
CBK provisional data also pointed to an expanded deficit of $4.8 billion (Sh496 billion) against the $63.4 billion (Sh6.5 trillion) economy, putting the current account deficit at 7.7 per cent of gross domestic product in February from 5.9 per cent last year.
Treasury has since retracted the data and CBK Governor Patrick Njoroge says calculations point to a 5.8 per cent deficit for the year.
“The current account balance was at a deficit of $ 4,464.7 million in the year to February 2017 from a deficit of $ 3,529.5 million in the year to February 2016. As a share of GDP, the current account deficit was estimated at 5.8 per cent in the year to February 2017 compared to 5.5 per cent in the year to February 2016,” read Treasury’s new data.
Kenya’s exports fell by 5.6 per cent (mainly coffee, horticulture, manufactured goods, chemicals and related products) while the value of imports increased by 3.3 per cent, reflecting increase in payments for oil importation on account of the rebound in international prices.
The threat is magnified in a drought-stricken year, especially since during the last drought in 2011, the current account deficit shot to 12.2 per cent of GDP.
Current account is usually important to the stability of the currency since it dictates the amount of dollars Kenya will need to import goods against available reserves.