Kenya’s export revenues have experienced a significant downturn, reaching a 20-year low. During the six-month period that ended in June, the country’s export revenue to the United States declined at the fastest rate seen in more than two decades.
This decline has hindered merchants from capitalising on the depreciation of the Kenyan shilling against the US dollar.
Preliminary official statistics compiled by the Central Bank of Kenya reveal that the nation exported commodities worth Ksh 32.21 billion ($224.54 million) to the largest economy in the world. This figure is down from Ksh 40.36 billion ($281.35 million) during the same period in the previous year.
The decline in export revenue by 20.19% marks the largest decrease since 2002. This was when the Africa Growth and Opportunity Act (AGOA) came into effect, allowing thousands of items to enter the United States duty-free and without quota limitations. Kenya primarily exports clothing under the AGOA deal, while importing pharmaceuticals and aeroplanes from the US.
Jaswinder Bedi, the board chairman of Kenya Export Promotion & Branding Agency, has attributed the decrease in export revenue to an oversupply of orders from Kenya. Last year, the US experienced high levels of inflation, which affected sales in the country and many other developed nations. As a result, there was a surplus of purchased goods that led to high inventory levels in the US.
“The drop is largely because the inventory levels in the USA are high following excess purchase post-Covid-19,” Mr. Bedi stated in an interview with the Kenyan news publication, Business Daily.
This decline in Kenya’s export revenues has raised concerns among traders and policymakers. Export revenue plays a vital role in the country’s economic growth and stability, as it contributes to foreign exchange earnings and job creation. It also helps to narrow the trade deficit and support sustainable development.
In the first half of the year, Kenya experienced a notable increase in the value of its exports to the United States. The export value rose by an impressive 48.12%, reaching a record high of Ksh40.36 billion for the review period. This growth is particularly significant considering that the largest economy in the world, the United States, saw a decline in its orders during the same period. As a result, both Pakistan and the Netherlands surpassed the United States to become Kenya’s top international destinations.
When it comes to specific products, the Netherlands emerges as the primary buyer of Kenyan cut flowers, while Pakistan consistently purchases large quantities of tea. However, beyond these sectors, Kenya has faced challenges in increasing its exports to the US market. Many firms within the country attribute this difficulty to the high cost of manufacturing.
Despite enjoying duty-free access to the US market, Kenyan products remain 15 to 20 percent more expensive than their competitors in the Far East or Central Asia. This disparity in cost can be attributed to factors such as expensive power, water, and labour in Kenya.
Antony Mwangi, the CEO of the Kenya Association of Manufacturers, highlighted this issue in a previous interview, emphasising that these cost burdens have hindered the country’s ability to fully exploit the opportunities presented by the US market.