Statement at the Conclusion of an IMF Mission to KenyaPress Release No. 13/382
October 2, 2013
An International Monetary Fund (IMF) mission led by Mr. Domenico Fanizza visited Nairobi from September 19 to October 2, 2013 to conduct the sixth and last review under the three-year Extended Credit Facility (ECF) arrangement approved in January 2011. The mission met with Mr. Henry Rotich, Cabinet Secretary of the National Treasury, Professor Njuguna Ndung’u, Governor of the Central Bank of Kenya (CBK), other senior government officials, and representatives of the private sector, civil society and development partners. The team wishes to thank the authorities for their warm hospitality and the constructive discussions. The mission members would also like to express their deep sadness following the tragic event that hit Nairobi on September 21st, and assure the authorities of their determination to continue to support Kenya and its economic reform efforts.
At the conclusion of the visit, Mr. Fanizza issued the following statement:
“Kenya’s economic reforms over the last three years have paid off. The economy has proved resilient in the face of exogenous shocks such as the 2011 drought, and stagnating demand in traditional export and tourism markets as a result of the global financial crisis. Budgetary discipline has helped ensure fiscal and external sustainability, while still providing sufficient resources to implement the new Constitution and start fiscal devolution. Monetary policy has succeeded in bringing inflation down and cementing expectations of low and stable prices. Economic growth has remained robust and is on an upward trend, supported by strong domestic demand. Structural reforms have made progress to prepare for the devolution process, notably through a strengthened regulatory environment for public financial management at both national and county level. The recently enacted new Value Added Tax law should increase administrative efficiency, bolster revenue collection, and create resources for priority social and development outlays. International reserves have risen to more than $6 billion, and the external current account balance excluding capital imports—which have surged because of oil exploration— has improved. Growing financial inclusion offers the hope of job-creating opportunities for millions of previously excluded Kenyans and, combined with the recent decline in interest rates, should provide support to economic activity in the period ahead. Investor interest in the Kenyan economy has gained momentum, translating into strong performance on the stock market and the establishment of regional operations by foreign corporations and financial institutions.
“These reforms have set the stage for stronger, more inclusive, and lasting economic growth, but challenges persist. Efforts to anchor economic stability through sound fiscal and monetary policies and market-oriented reforms should redouble to build upon the foundations of success. In particular:
- The CBK should continue to aim at anchoring expectations of low inflation. Recent price pressures reflect the one-off impact of removing VAT exemptions, and inflation should fall back within its target range by early 2014.
- Fiscal policy should focus on raising the efficiency and quality of public spending. Scarce public resources need to be used well, underscoring the importance of containing pressures on the wage bill, finalizing implementing regulations for the Public Financial Management Act, and enhancing the quality of program-based budgeting based on the priorities of the Second Medium Term Plan of Vision 2030. The ongoing fiscal decentralization provides an opportunity to improve accountability and the quality of service delivery, but its success will depend on building capacity at the county level.
- Improved risk-management practices and consolidated supervision of systemically important financial groups should enhance financial stability. Deepening of the financial sector should accelerate with the approval of the Real Estate Investment Trust in 2013 and financial access progress even further with the sharing of positive information on borrowers by Credit Reference Bureaus.”
The sixth and final program review under the ECF arrangement is tentatively scheduled for consideration by the IMF Executive Board in November 2013. Upon approval, the last tranche of the loan for an amount of about US$110 million would become available, bringing total disbursements under the arrangement to SDR488.52 million (about US$750 million).