The impact of the shift from western to eastern trade partners on Kenya’s balance of payments

Abstract

A country’s Balance of Payments, a reflection of the state of its economic transactions (positive or negative) with the rest of the world, is heavily impacted by its trade partners. Research on the impact of choice of trade partners are relatively few. This research study investigated the effect of changing trade partners (from West to East) on Kenya’s Balance of Payments as measured by Balance of Trade (imports and exports) and Balance of Payments. The study used a sample of seven countries from the West and seven from the East. Using annual time series trade data for the period 1997 to 2011 the study evaluated trade volume trends with a view to ascertain if first, Kenya had changed trade partners; and two, if this change had had any impact on its Balance of Payments; and if yes, to ascertain if that impact was positive or negative. Primary data was collected through questionnaires. Secondary data was collected from Kenya National Bureau of Statistics (KNBS). Regression analysis, correlation analysis and descriptive statistics were used to analyze the data collected using statistical package for social sciences (SPSS) and Microsoft Excel. The research found that the Balance of Trade with Eastern trading partners is worse that the Balance of Trade with Western partners. In addition, the research clearly demonstrated that there has been a shift from Western trading partners to Eastern trading partners mainly for imports and that this has resulted in a corresponding worsening of Kenya’s Balance of Payments.