NAIROBI - Kenya's increasing gap between imports and the exports has been linked to its prevailing exports to the European Union linked to lifestyle spending that is vulnerable to austerity measures likely to affect consumer spending at the time the region is experiencing turbulent economic times.

Chairman of the Kenya Private Sector Alliance (KEPSA) Patrick Obath said in Nairobi on Wednesday that this has affected Kenya balance of payment solution that may eventually affect the value of the shilling.  

He said immediate measures like reducing the cost of those exports should be taken so that consumers in the EU can continue to afford them.

"We need to price the flowers, vegetable and fruits better," he said, so as to prevent a scenario where consumers avoid buying the produce altogether that will reduce foreign exchange inflows, threatening the stability of the shilling.

He spoke in Nairobi during the Kenya Prime Minister's Roundtable, a forum for engagement between the private sector and the government.

Kenya mainly exports fresh flower, fruits and vegetables to the EU, with flowers accounting for the bulk of the export in volume and value.

Several countries in the EU are facing sovereign debt problems and the bailout by regional economic giants like Germany is creating economic uncertainly across the eurozone that may lead to less consumer spending.

Kenya exported horticulture products worth $1.1 billion last year, an 18 percent increase from the previous year data from the US international aid agency's USAID Kenya Horticulture Competitiveness Project.

Any austerity measures by EU households will affect sale of Kenya horticulture at the time when the country's balance of payments -- the value between exports and imports -- is on a deficit.

The latest data from the Central Bank of Kenya indicates that the country's overall balance of payments position reduced from surplus of 365 million dollars in the year to September 2010 to deficit of 220 million dollars in the year to September 2011.

While the value of exports increased by 750 million dollars to 5.7 billion dollars in the year to September 2011, the value of imports also increased by 22.7 percent to 14.4 billion in the same period, meaning that the country imported two and a half times the value of what it exported.

The Central Bank of Kenya said increased exports were due to increases in exports proceeds from coffee, manufactured goods to the regional markets, raw materials, chemicals and related products.

In the medium term however, the government has assured investors that the adequate measures have been taken to ensure the stability of the shilling despite the debt crisis in the EU.

"We have taken adequate measures and I can assure that the shilling will remain stable. Inflation is also expected to drop for the third month to 16.7 percent reflecting our desire to achieve single digit inflation," said Economic Secretary in the Ministry of Finance Geoffrey Mwau.

He said the main concern for the government is the failure to meet its revenue targets for this financial year that yet money is required to finance the Kenyan war in Somalia, the implementation of the constitution and the forthcoming general elections.

"Going forward, we shall need to tighten our belts in the government so that we do not destabilize the economy and affect the value of the shilling," said Mwau.