The Central Bank of Kenya (CBK) has revised its projection of this year’s current account deficit to 5.9 per cent of GDP from 5.2 per cent previously, citing higher crude prices which have resulted in a higher Kenya’s petroleum import bill.
The current account measures the difference between a country’s forex inflows and outflows, falling into deficit when outflows are higher.
“The change to 5.9 per cent is entirely driven by the higher oil prices that we are expecting. If we abstract from the higher oil prices we would be exactly where we projected before at 5.2 per cent,” CBK Governor Patrick Njoroge.
The current cost of crude is a major factor in determining the directing of the current account, given that petroleum products account for 17.5 per cent of the country’s total import bill.
Oil prices, which had fallen to decades lows of $19 per barrel at the height of the Covid-19 pandemic in 2020, have now gone up to $105.30, with a significant gain coming after Russia invaded Ukraine in late February, causing supply jitters.
The rise in current accounts also points to a tighter dollar supply in the market as the gap between outflows and inflows widens, putting the shilling under further pressure and raising the cost of living for Kenyans.