Regional trade has kept Kenya's economy afloat, says CBK deputy boss

Cargo trucks cross Busia border point. Intraregional trade accounts for 40 per cent of Kenya's exports.

Kenya’s resilient economy is linked to the country’s strong intraregional trade, which has cushioned it from the global financial crisis.

Much of Kenya’s trade is with its East African peers, a factor that has strengthened its financial sector by ensuring the country is not exposed to the volatility in the global financial market.

According to Central Bank of Kenya (CBK) Deputy Governor Sheila M’Mbijiwe, 40 per cent of Kenya’s trade is largely regional and this has cushioned the country’s currency against volatility in the global market.

“The diversity of Kenya’s trade within the region has helped it stabilise its currency,” explained M’Mbijiwe.

Kenya’s trade with the East African countries --Tanzania, Uganda, Rwanda and Burundi--in 2014 amounted to Sh126 billion, while trade with the rest of Africa amounted to Sh115 billion. This brought trade with Africa to stand at Sh241 billion.

However, the shilling has lately been hard-hit by the strengthening of the dollar, with the local currency dipping to a low Sh106 against the greenback in September.

M’Mbijiwe also noted that a dozen of Kenyan banks have been at forefront in doing cross-border trade in the region. A recent report by the International Monetary Fund (IMF) showed that Kenya is among the few countries in Africa that have played an active role in shaping the concept of Pan-African banking with banks such as Equity, Co-operative Bank and KCB venturing into the region and beyond. Other countries include Nigeria and South Africa.

She was speaking at the opening of the 15th Advanced Structured Trade Finance Seminar organised by Pan-African multilateral financial institution, the African Export-Import Bank (Afreximbank). The seminar is aimed at bolstering Africa’s participation in global trade.

Afreximbank’s President Dr Benedict Oramah reckoned that few African countries trade more with Africa compared to Kenya.

He added that unlike in the 1980s, the African continent today is teeming with Pan African banks, which are among the “ammunitions” the continent has put in place to deal with the 1980s risks.

Dr Oramah regretted that while central banks in Africa have huge reserves- about $500 billion-they still placed them in offshore accounts.

“We can create instruments to help mobilise these deposits. These central banks can put money at Afreximbanks at our risk,” he explained.

M’Mbijiwe regretted that Africa contributes only three per cent of global trade.

Concerns were also raised over Africa’s large trade financing gap amounting to $100 billion dollars, according to African Development Bank (AFDB).

For Kenya, for example, trade balance worsened by 18.7 per cent from a deficit of Sh911 billion in 2013 to a deficit of Sh1.1 trillion in 2014 as imports outpaced exports in growth, according to the Economic Report 2015. While imports grew at 14.5 per cent, exports grew at seven per cent.

Afreximbank’s main areas of intervention include provision of trade finance, project finance, research and policy inputs, corporate finance and advisory services capacity building. Its clients include businesses, government, financial institutions and local banks.

The bank with the participation of JP Morgan gave Kenya’s national carrier, Kenya Airways (KQ), Sh86 billion guaranteed long-term loan to support its fleet renewal and expansion programme.

The bank will soon be setting up base in Kenya and has already received Cabinet approval.