Latest

Kenya's balance of payments for the second quarter of 2025 reveals a concerning economic landscape, marked by a substantial widening of the current account deficit, a sharp decline in exports, and an increase in external debt. Data released by the Kenya National Bureau of Statistics (KNBS) indicates that while financial inflows and remittances provided some relief, they were insufficient to offset the broader economic pressures.

Context

The current account deficit surged by 76.6% to Ksh83.7 billion in the second quarter of 2025, a significant increase from Ksh47.4 billion recorded during the same period in 2024. This expansion is primarily attributed to a wider merchandise trade deficit, which grew by 11.7% to Ksh348.4 billion.

Exports experienced a steep decline of 16.5%, falling from Ksh420.2 billion in the second quarter of 2024 to Ksh351.0 billion in the second quarter of 2025. Conversely, imports saw a smaller decrease of 4.5%, moving from Ksh732.0 billion to Ksh699.4 billion between April and June 2025.

Law/Policy

The government's fiscal and monetary policies are likely to come under increased scrutiny following these economic indicators. Policymakers may need to consider measures to boost exports, manage external debt, and attract foreign direct investment to stabilize the balance of payments. The National Treasury, led by Cabinet Secretary Njuguna Ndung'u, is responsible for formulating and implementing economic policies that address such challenges.

Stakeholders

Analysts suggest that these economic developments will likely influence near-term public debate and policy execution. Key stakeholders, including businesses, trade unions, and international financial institutions, are expected to urge for clarity on timelines, costs, and safeguards related to economic interventions. The private sector, particularly export-oriented industries, will be closely watching government responses to mitigate the impact of declining exports.

Evidence/Data

• Current Account Deficit (Q2 2025): Ksh83.7 billion
• Current Account Deficit (Q2 2024): Ksh47.4 billion
• Percentage increase in Current Account Deficit: 76.6%
• Merchandise Trade Deficit (Q2 2025): Ksh348.4 billion
• Percentage increase in Merchandise Trade Deficit: 11.7%
• Total Exports (Q2 2025): Ksh351.0 billion
• Total Exports (Q2 2024): Ksh420.2 billion
• Percentage decrease in Exports: 16.5%
• Total Imports (Q2 2025): Ksh699.4 billion
• Total Imports (Q2 2024): Ksh732.0 billion
• Percentage decrease in Imports: 4.5%

Source: Kenya National Bureau of Statistics (KNBS)

Risks/Implications

The widening current account deficit and declining exports pose several risks to the Kenyan economy. These include potential pressure on the Kenyan Shilling, increased cost of living due to higher import prices, and challenges in servicing external debt. A sustained decline in exports could also hinder job creation and overall economic growth. The government may face difficult choices in balancing fiscal consolidation with the need to stimulate economic activity.

Unknowns

The specific factors contributing to the sharp decline in exports are not fully detailed in the provided data. Further analysis is needed to determine whether this is due to global economic slowdowns, specific commodity price fluctuations, or domestic production challenges. The long-term impact of the increased external debt on Kenya's credit rating and borrowing capacity also remains to be fully assessed.

Timeline

The data covers the second quarter of 2025, specifically from April to June. The KNBS report was published on October 5, 2025, at 8:23 PM EAT.

What to Watch

Observers will be closely monitoring the government's response to these economic trends, particularly any new policy announcements aimed at boosting exports and managing debt. The performance of key export sectors, such as agriculture and manufacturing, in the coming quarters will be crucial. Additionally, the trajectory of global commodity prices and international trade relations will play a significant role in shaping Kenya's economic outlook.

Related

This report follows previous concerns raised by the International Monetary Fund (IMF) regarding Kenya's debt sustainability and the need for fiscal reforms. The East African Community (EAC) also continues to monitor trade balances among member states, with regional trade policies potentially impacting Kenya's export performance.