Costly fuel pushes Kenya near record Sh1trn trade deficit

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Kenya’s trade deficit in goods climbed towards a record Sh1 trillion mark in the first six months of 2026, after an increase in the cost fuel imports widened the gap between export earnings and the import bill.

The gap between exports and imports widened by 27.3 percent to Sh998.2 billion in the six months to June 2026, from Sh783.9 billion in the corresponding period last year, the Kenya National Bureau of Statistics says.

This was the fastest annual widening of Kenya's first-half merchandise trade deficit in four years, since the 30.7 percent recorded in 2022.

The trade deficit had remained relatively stable at Sh755 billion to Sh784 billion in the first half of every year between 2023 and 2025, the data shows.

The Sh214.3 billion rise puts the merchandise trade gap within touching distance of Sh1 trillion, highlighting the rising cost of Kenya’s dependence on imported energy and capital goods.

This was despite exports growing at 14.1 percent to reach a record Sh632.3 billion during the period, from Sh554.1 billion a year earlier.

Imports, however, rose from to Sh1.63 trillion from Sh1.34 trillion, creating a Sh292.5 billion jump.

Fuel and lubricants accounted for nearly half of that increase, with their import value rising by 50.2 percent to Sh412.6 billion from Sh274.7 billion. The Sh138 billion rise in fuel imports was the single biggest contributor to the growth, reflecting the impact of higher energy prices and heightened concerns over supply disruptions as a result of the US-Israel war on Iran.

Central Bank of Kenya Governor, Kamau Thugge, said the rise in imports partly reflected businesses bringing forward purchases because of the crisis in the Middle East.

“Growth in imports was strong, and this reflected front-loading of imports in the first half of this year,” the governor said on August 12.

He said the front-loading is expected to ease imports in the second half of the year, potentially reducing pressure on the trade balance.

“We expect growth in exports of 10.1 percent for the whole year,” he said, adding that the import increase was broad-based, with food, mineral fuels, intermediate goods and capital goods contributing to the stronger demand.

KNBS data shows imports of machines and other capital equipment rose by 19.5 percent to Sh216.2 billion, pointing to continued demand for investment-related goods.

Imports of transport equipment rose by 19.6 percent to Sh151 billion, while food and beverages went up by 20.6 percent to Sh169 billion.

Industrial supplies, the largest import category, increased by 12.7 percent to Sh565.9 billion, demonstrating that the jump in imports extended beyond petroleum products.

The increase in fuel imports is particularly significant because Kenya remains heavily dependent on petroleum products to meet its energy and transport needs.

The Iran war added another layer of pressure by threatening global energy supply chains and pushing up costs for economies that rely heavily on imported fuel.

The import surge came as the country's export sector recorded stronger earnings, though performance was uneven across major commodities.

Coffee exports rose by 8.1 percent to Sh38.2 billion, while cut flower earnings increased by 5.5 percent to Sh49.7 billion in the half. Tea, Kenya’s biggest export earner, posted much weaker growth, with earnings rising by 1.6 percent to Sh91.5 billion from Sh90.1 billion.

Mr Thugge said horticulture, machinery and transport equipment would support export growth, while tea would continue contributing despite slower growth in earnings.

“We expect exports to grow by 8.1 percent in 2026 and 7.1 percent in 2027,” the CBK boss said.

The performance of fresh produce was less encouraging, with fruit export earnings plunging by 26.2 percent to Sh21.6 billion from Sh29.3 billion.

Vegetable earnings also declined by 8.7 percent to Sh10 billion, underscoring the uneven performance of horticultural exports despite expectations of stronger overall export growth.

The widening trade deficit could put renewed focus on Kenya’s need to expand higher-value exports and reduce exposure to international energy and commodity price shocks.

Reporting originally appeared via Business Daily. Read the full source for additional context.