The country’s external payments position weakened last year after imports outpaced growth in exports, a new report from the Ministry of Finance showed.
While the country exported goods and services worth about $6 billion (Sh498 billion) last year, its imports amounted to about $15 billion (Sh1.2 trillion), according to the report titled Quarterly Economic and Budgetary Review.
The situation was worse than that in 2010, when exports stood at $5 billion (Sh415 billion) against about $12 billion (Sh996 billion), and in 2009 with exports at $5.2 billion (Sh431.6 billion) and imports at $13 billion (Sh1 trillion).
"The trade account balance worsened by 26.3 per cent to $9 billion last year from $7.169 billion the previous year reflecting a faster growth in imports relative to exports," said the report.
Similarly, the services sector also registered a decline equivalent to two per cent based on year-to-year growth under Kenya’s balance of payments account from about $4.7 billion in December 2010 to $4.6 billion in December last year. This resulted in the widening of the current account deficit from $2.5 billion in December 2010 to $4.5 billion in December last year, said the report. In the same period under review, economic growth declined to 3.6 per cent in the third quarter of last year, compared to 5.7 per cent in the same period in 2010.
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The report attributed the slowdown to deteriorating external environment, especially among Kenya’s trading partners.
"This slowdown was mainly caused by sluggish global recovery on account of the sovereign debt crisis in the Euro Zone, weak growth in the US, and a general slowdown in output growth for most of Kenya’s trading partners," it said.
The report cited the soaring inflation, depreciation of the exchange rate, and the prolonged drought as some of the key internal factors that contributed to the decline of economic growth.
"Inflation picked to reach double digits level last year, mainly due to high food prices, a spike in the international oil prices, and the weakening of the Kenya shilling against major currencies," the report said.
"The 12-month overall inflation rose to reach 19.7 per cent in November, before easing to 18.9 per cent in December and 18.3 per cent in January," said the report. However, the report noted that the Government has taken appropriate policy actions to rein in inflation, among which was the adoption of a tighter monetary policy of raising its lending rate from 6.25 per cent in August last year to 18 per cent in December last year by the Central Bank of Kenya.
In the same period, the report observed that the agricultural and forestry sector grew by 4.8 per cent in the third quarter of last year. However, this was still a drop from the 5.7 per cent growth recorded in the same quarter of 2010.
However, the report said that the growth in the sector reflected increased production in food, horticulture and industrial crops.
The report further noted that total external debt stood at $8.1 trillion in the period ending December last year. The donor countries include China, US, Japan, Britain, France, Italy, Saudi Arabia, Canada, Spain and Netherlands. — Xinhua