Press Release No. <a name="P16_75"></a>04/94

The Executive Board of the International Monetary Fund (IMF) welcomed Kenya's Poverty Reduction Strategy Paper (PRSP).

Kenya's most recent Poverty Reduction and Growth Facility (PRGF) arrangement was approved in November 2003 (see Press Release No. 03/201 ). The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments.

At the conclusion of the Executive Board's discussion of Kenya's PRSP on May 10, 2004, Ms. Anne Krueger, the IMF's First Deputy Managing Director and Acting Chair, stated:

"Kenya's Poverty Reduction Strategy Paper (PRSP) provides a comprehensive and coherent framework for achieving macroeconomic stability, sustained economic growth, and poverty reduction in Kenya consistent with the Millennium Development Goals. The PRSP appropriately puts poverty reduction at the top of the policy agenda. A broad participatory approach, which was initiated during the preparation of the Interim-PRSP, has underpinned the development of the full PRSP.

"The PRSP builds on the strategy articulated in the Interim-PRSP and on the progress that has been made in implementing that strategy. While placing the promotion of strong economic growth at the center of the strategy to reduce poverty, the PRSP recognizes the need for additional actions to ensure that the benefits of economic growth are shared by all. It therefore also emphasizes measures to improve the access of the poor to basic services, such as education, health and HIV/AIDS, and physical and financial services, as well as to address the special concerns of disadvantaged regions and other vulnerable groups with appropriate safety nets. The medium-term expenditure framework and the structural reform agenda reflect the priorities and needs of the country as it strives to reach the Millennium Development Goals. The PRSP also emphasizes the importance of improving governance as a pre-requisite for economic and social development, and contains several governance-related priorities.

"In moving forward, several challenges will need to be addressed. The cross-cutting challenge will be to prepare an explicit and well-prioritized roadmap of reforms and policy actions envisaged over the medium term, with a clear timeline of implementation. Specific policy challenges include strengthening the public finance, restructuring public expenditure to increase resources for social expenditures, successfully implementing administrative and fiscal devolution, and capacity-building at all tiers of government to enhance the effectiveness of public service delivery. It will also be important to introduce a broader rural development strategy for improving agricultural productivity, expanding non-farm rural employment and reducing rural poverty, and to finalize institutional arrangements for monitoring social indicators and providing timely feedback into the policy process. Increased amount and timeliness of donor support, particularly program assistance, will be critical to achieving the PRSP's objectives," Ms. Krueger said.