Central Bank of Kenya Governor Patrick Njoroge.[Photo/BusinessDaily]
The central bank has said that the current account deficit is projected to narrow to 5.4 per cent this year on lower food and standard gauge railway (SGR) related imports.
This comes even as the fuel import bill continues to rise on higher global crude prices.
The drought-driven food imports in the second half of last year together with the hefty outlay in importing rolling-stock for the new railway to push the deficit to 6.2 per cent, higher than the 5.8 per cent Central Bank of Kenya (CBK) had projected at the beginning of last year.
“As a baseline we are looking at a current account deficit for 2017 of 6.2 per cent. It is elevated above the 2016 number mainly because of food imports related to the drought and fuel imports related to the higher price of oil,” said CBK governor Patrick Njoroge following the Monetary Policy Committee meeting last week.
“We are projecting the deficit to narrow in 2018 to 5.4 per cent of gross domestic product (GDP) on the back of exports of horticulture and others, tourism, and also very favourable remittances. The foreign exchange market is expected to remain balanced on the back of this favourable current account position.”
The CBK data shows that remittances, tourism inflows and tea exports continued to offer the bulk of support for the current account in 2017.