Kenya's Imports Drop, Signaling Production Slowdown

Kenya's Imports Drop, Signaling Production Slowdown

The country's imports fell by 10.61 percent to around $17.12 billion compared to the previous year. This decrease, alongside a marginal 2.2 percent drop in total exports to $7.26 billion, narrowed the goods trade deficit to $9.85 billion. The contraction in imports was attributed to reduced demand for primary goods that support key sectors like manufacturing.

Kenyan exports, particularly traditional produce like tea and coffee, experienced declines. Earnings from tea exports dropped by 2.2 percent, while coffee exports declined by 18.7 percent. The reliance on raw exports has hindered efforts to reduce the trade deficit, with value addition being limited due to higher taxes on processed products in destination markets.

The decrease in imports was also driven by lower orders for semi-processed goods used in manufacturing, with machinery, iron, steel, paper, and textiles experiencing significant declines. The harsh business environment, rising costs of raw materials, electricity, and high tax rates have further impacted manufacturers' operations, leading to reduced consumer purchasing power and demand for manufactured goods.

The reduction in expenditure on machinery was linked to a slowdown in public investment in infrastructure projects, with a notable cut in the development budget by the government. This reduction in public spending on projects like roads and power generation has affected various sectors, including cement makers, steel manufacturers, contractors, and workers employed in the infrastructure pipeline.