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Trade and Regional Integration in Kenya: FY2019/20
Kenyan exports have been volatile and declined during the period from 2015 to 2018. This has not led to a significant deterioration in gross official foreign exchange reserves supported by the persistent depreciation of the KES until 2017. The slower growth in merchandise exports has led to a minor deterioration of Kenya’s current account balance due to the continued improvement in the balance of services trade. Kenya is still dependent on agriculture-based exports which are also its top traded goods with its neighbours in the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). However, Kenya is highly integrated in both COMESA and EAC but its trade is unbalanced due to the significant trade surplus enjoyed by the country in both regions. This suggests that there is significant room for Kenya to increase its imports from both regions and Kenya might want to rebalance its trade towards greater reliance on COMESA in order to reduce its overreliance on the EAC. But the rebalancing of Kenya’s trade in the regions might be restrained by structural factors like geographic proximity.