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Kenya’s regional imports have surpassed exports in what can be attributed to the production of similar products on the continent that raises competition with Kenya’s products.
This comes at a time when the country is struggling with a trade deficit (the gap between imports and export), specifically, for the 20 year period between 1998 – 2018 when the exports grew average 8.4 percent per year while imports grew average 11.5 percent per year.
The total exports in the first five months in 2019 dropped 1.96 percent to Sh107.55 bn compared with a year ago. The trade deficit was signaled by a drop in exports to key markets like Uganda, Tanzania, and D.R Congo
For instance, exports from Kampala fell to Sh30.77 bn from Sh34.51 bn in 2013 while imports from Uganda doubled to Sh13.95 bn from Sh5.14 bn in 2014, data by Central Bank of Kenya indicated.
Tanzania’s grew to Sh12.95 bn from Sh8.34 bn at a time when the country entered into a deal with Kenya to sell one million tons of maize and flour within one year to curb the maize shortage crisis experienced in Kenya
Meanwhile, half-year exports to Tanzania reduced to Sh15.79 bn this year from Sh21.73 bn five years ago.
According to Charles Ogutu, a research analyst at Genghis Capital Limited Research, the trade deficit affects job creation in a negative way.
” By relying on imports, we have outsourced jobs to our trading partners, more so the Far East Region which account for a significant aspect of the origins of our imports. This will dent the manufacturing jobs as targeted under the Big Four Agenda,” he told WeeTracker.com
The trade deficit comes in the wake of decreased exports of the country’s key commodities like tea whose exports value fell Sh10 bn in the first quarter of the year.
In a bid to increase local production, the Treasury proposed policies that are geared towards reigniting the manufacturing sector’s growth and development.
For instance, the reduction of Import Development Fee (IDF) on raw materials to 1.5 from 2.0 percent, and the increase in IDF on finished goods from 2 percent to 3.5.
“This is expected to reduce the cost of imported raw materials, thus improving the competitiveness of local manufacturers against finished imports,” Kenya Association of Manufacturers (KAM) CEO Phyllis Wakiaga said.
In the 2019/2020 budget statement, the Treasury also proposed the increment of Railway Development Levy (RDL) for finished products from 1.5 percent to 2 percent which is expected to cushion manufacturers against imported finished goods.
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