The latest data show that Kenya's current-account deficit grew wider in the third quarter of 2010 to US$582m-from US$547m in the second quarter and US$485m a year ago-as quicker GDP growth sucked in imports faster than the revival in exports. Comparing the first three quarters of 2010 with the same period in 2009, exports rose by 14%, driven by tea (up by 41%) and manufactures (up by 18%), while imports (cif) jumped by 18%, spurred by manufactures (up by 32%), oil (up by 29%), chemicals (up by 21%) and equipment (up by 16%). The net result was to push the trade gap wider, by 21% to US$4.9bn, from US$4bn a year earlier. This was partly offset by a rise in the invisible surplus (on services, income and current transfers), which jumped by 24% to US$3.3bn in the first three quarters, buoyed by tourism, and transport and financial services-and by positive income flows-although private current transfers (mainly remittances), the largest single earner, were flat at US$1.4bn. The current-account deficit for the first three quarters of 2010 was therefore 15% higher year on year at US$1.5bn and, on this basis, we now estimate that the full-year shortfall rose to at least US$1.8bn in 2010 (5.9% of GDP) from US$1.6bn in 2009 (5.7% of GDP). The gap remains comfortably covered by capital and financial inflows, but these are dominated by short-term flows, which can be volatile. The IMF's recent funding package (worth US$509m over three years) will help to reduce Kenya's external vulnerability.

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