## Kenya: Staff Report for the 2014 Article IV Consultation

_IMF Staff Country Reports, October 2, 2014_

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## Bibliographic details
- Published: October 2, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498399876.002

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### Context and recent developments
- Kenya has embarked on major reforms in line with the 2010 constitution, and the new government has initiated devolution at a fast pace with a reporting framework to monitor progress and challenges.
- Macroeconomic stability in a market-friendly environment continues to attract foreign investors.
- Kenya placed its first US$2 billion Eurobond at favorable terms; proceeds are to be used to upgrade power generation and transportation.
- Promising commercial prospects of oil discoveries could provide significant foreign exchange and fiscal resources.
- Regional integration: Kenya is participating actively in East Africa integration and has shown progress in reducing delays from the port of Mombasa to Kampala and Kigali.
- Financial sector developments:
  - Kenyan banks are expanding their business models through East Africa and other regional countries while complying with upgraded prudential regulations.
  - The Central Bank of Kenya (CBK) maintains proactive financial inclusion policies that have facilitated access to credit by small and medium enterprises.
- Governance and security:
  - Legal reforms led to the Financial Action Task Force removing Kenya from its watch list.
  - Recent terrorist attacks and threats have raised security concerns, especially in coastal areas bordering Somalia.

### Outlook and macroeconomic policies
- Growth and fiscal stance:
  - Growth is projected to accelerate to 5.8 percent in 2014/15, driven by higher public and private investment and measures to improve the business environment.
  - The 2014/15 budget aims at rebalancing recurrent and development spending.
  - Medium-term fiscal policies intend to bring down the debt burden consistent with the East African Community Monetary Union (EAMU) Protocol convergence criteria.
- Monetary and price developments:
  - Inflation remains broadly in check, but rising food prices and rapid credit growth require careful monitoring by the CBK.

### Key issues and staff discussions
- Devolution and public financial management:
  - Discussions centered on devolution implementation, particularly enforcement of accountability provisions.
  - Some checks and balances are effective — for example, Treasury approval is required for guarantees for county borrowing — but a more systematic framework is needed.
  - Staff and authorities agreed that the scale of transfers to counties magnified government cash management problems.
  - The recently introduced Treasury Single Account (TSA) is expected to help address cash management problems and contribute to more effective monetary operations.
- Natural resource governance:
  - Discussions focused on designing the legal framework for natural resource management to ensure consistency with public finance management provisions.

### Subject areas and keywords covered
- Subject areas: Balance of payments statistics; Banking; Budget planning and preparation; Economic and financial statistics; External debt; Government finance statistics; Public debt; Public financial management (PFM).
- Keywords: Africa; authority; Balance of payments statistics; Budget planning and preparation; CR; debt; deficit; devolved government system; East Africa; Global; Government finance statistics; government management; IMF staff; inflation expectation; investment needs; ISCR; Kenya; Sub-Saharan Africa.

*International Monetary Fund. Kenya: Staff Report for the 2014 Article IV Consultation (October 2, 2014).*

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_Source: https://www.imf.org/en/publications/cr/issues/2016/12/31/kenya-staff-report-for-the-2014-article-iv-consultation-42379_