During the third quarter of 2017, merchandise trade deficit widened by 32.5 per cent to KSh 289.7 billion from KSh 218.7 billion in the third quarter of 2016 as summarised in Table 1. This was mainly on account of increased imports valued on free on board basis that was driven by growth in the import bill of food and petroleum products in the third quarter of 2017. International trade in services balance grew by 22.5 per cent from a surplus of KSh 36.5 billion in the third quarter of 2016 to a surplus of KSh 44.7 billion in the corresponding quarter of 2017, thereby absorbing 15.4 per cent of the merchandise trade deficit. Transfers, otherwise referred to as secondary income, increased to KSh 120.2 billion in the third quarter of 2017 out of which KSh 51.3 billion was from external remittances. Consequently, the current account balance worsened by 28.9 per cent to a deficit of KSh 145.4 billion in the third quarter of 2017 compared to a deficit KSh 112.8 billion in the corresponding quarter of 2016.
Net financial inflows more than halved from a surplus of KSh 67.6 billion in the third quarter of 2016 to a surplus of KSh 27.7 billion in the third quarter of 2017. Gross official reserves decreased by 1.8 per cent from KSh 830.6 billion as at end of September 2016 to KSh 815.5 billion as at end of September 2017 translating to about 5.4 months of import cover.
