As Kenya prepares to host the 10th World Trade Organization conference in December, perhaps it is best to ask whether the country is a loser or winner in global trade.
The 2014 economic survey argues that it is a winner, as it is expected to grow by 1.5 per cent in 2015, from 3.0 per cent during the last year.
Get exclusive access to the groundbreaking story of Ms. Faith Odhiambo’s historic presidency at LSK in our Latest Edition of Nairobi Law Monthly MagazineDownload Latest Edition Now For Ksh 150!
In 2014, for instance, the country’s balance of payments (BOP) was Sh126.1 billion, up from Sh 31.8 billion in 2013.
BOP is a measure of the fiscal transactions between one country and another. It looks at such factors as exports and imports as well inflows and outflows of foreign currency over a particular period.
In this case, Kenyan exports were more than imports. For instance, Kenyan imports in 2014 were sh 1,618.3 billion, compared to total exports which were Sh537.2 billion (See bar chart below).
A major part of this import bill can be attributed to fuel, though this is likely to change in 2015 with a decrease in global fuel price. Other Kenyan imports include machinery, chemicals and manufactured goods.
“Oil prices are projected to remain subdued throughout the year due to possibilities of sustained oversupply as Iran and Libya add to the current output after an improved political environment,” read the Economic Survey report.
According to the Kenya Revenue Authority, the direction of Kenyan exports showed a decline in Africa but an increase in the European Union and United States of America. In 2014, horticultural products accounted for 52.1 per cent of the total export earnings.
In Africa, Kenya confined itself to exporting its products to two trading blocs: the Eastern African Community and Common Markets for Eastern and Southern Africa.
Still, in 2014, the country recorded more inflows of foreign exchange than outflows. Total foreign exchange holdings came from two sources: local banks and the Central Bank of Kenya. In December 2014, local banks recorded increased foreign exchange holdings of $9,738 million (Sh995,170 million) from $8,483 million (Sh866,916 million) in 2013.
Furthermore, the Central Bank of Kenya had foreign exchange holdings of $7895 million (Sh806,826 million) in 2014, up from $6,560 million (Sh670,396 million) .
Foreign exchange from the diaspora was $4,099 million (Sh418,895 million) in December 2014, up from $3909 million (Sh399,478 million) during a similar period in 2013.
Yet, the Kenyan shilling weakened against major currencies such as the dollar, Euro and Yen. Where in December 2014 it traded at Sh 90.44 to the dollar, it has continued to weaken, and currently trades at Sh102.19.
The implication of this is that the prices of exports will continue to drop; but it also heralds a higher price for imports.