Deeper trade ties could ease Kenya’s regional trade imbalance

Deeper relations with EAC countries could help Kenya tackle the widening trade imbalance between imports and exports that continues to choke the country’s economic growth potential.

Key indicators of international trade show that in 2014, the country’s retail trade deficit widened due to a high import bill – this is according to last year’s report on Economic Survey.

The import bill saw an increase of14.5 percent while the earnings from exports registered a smaller increase of 7.0 per cent – that eventually led to the export-import ratio deteriorating from 35.5 per cent in 2013 to 33.2 per cent in 2014.

Imports rose by 14.5 per cent in 2014 to Sh 1,618.3 billion compared to total exports that slightly grew by 6.9 per cent to Sh 537.2 billion during the same period – while trade balance worsened by 18.7 per cent from a deficit of Sh 911.0 billion in 2013 to a deficit of Sh 1,081.1 billion in 2014.

Cash crops like tea, horticulture, articles of apparels and clothing accessories as well as coffee were the leading export earners for Kenya in 2014 collectively accounting for 52.1 per cent of the total export earnings.

In recent years, Kenya has experienced an influx of Foreign Direct Investments (FDI) inflows, totaling Sh116.4 billion in 2014, with most of it going into oil and gas and manufacturing industries.

In the last two years the country has been aggressively implementing a series of reforms in order to ease investments and doing business. And as 2016 Economic Survey expected to be released in the coming days, this trans-formative change of mindset and the general improvement of both infrastructure and security are expected to give Kenya a major boost as an investment and business destination.

Policy reforms and infrastructure development have reduced the cost of doing business in Kenya, thus attracting more FDI inflows.

Data by World Bank show that EAC members state export more goods, services among themselves that to any other region. Total goods and service exports from members’ state more than tripled over the last decade from $6billion in 2002 to $ 19.5billion in 2010.