Press Release No. <a name="P14_75"></a>05/242

Mr. Jürgen Reitmaier, Senior Resident Representative of the International Monetary Fund (IMF) in Kenya, made the following statement today in Nairobi:

"An IMF mission visited Kenya during October 17-28, 2005, for discussions with the government on the second review under Kenya's three-year economic program supported by the IMF's Poverty Reduction and Growth Facility (PRGF). The SDR 225 million (US$ 326.7 million) PRGF arrangement was approved by the Executive Board of the IMF on November 21, 2003 and increased to its present level on December 20, 2004. Completion of the second review would allow the disbursement of SDR 50 million (US$72.6 million).

"The mission, headed by Mr. Godfrey Kalinga, held productive discussions with the Kenyan authorities, including President Kibaki, on financial and structural policies relating to the PRGF review. The mission welcomed the continued pickup in economic activity in a stable macroeconomic environment and recognized the contribution of prudent fiscal and monetary management to this outcome. The mission shared the government's expectation of 5 percent economic growth during fiscal year 2005/06 (July/June).

"The IMF team's discussions with the authorities on financial policies revolved around quantifying fiscal and monetary targets for the remainder of 2005/06. The targets retained for the program are fully consistent with the objectives laid out in the government budget and with the Central Bank's monetary policy statements, and should help secure the government's inflation objective of 5 percent by mid-2006.

"Discussions on structural policies encompassed ongoing reforms in the financial and parastatal sectors, as well as a further strengthening of public expenditure management and governance. In this context, the mission welcomed the recent enactment of the public procurement and privatization bills. With respect to economic governance, the IMF team noted the strengthening of anti-corruption institutions and progress in their investigative work, but recognized also serious capacity constraints in the subsequent prosecutorial and judicial processes. The mission would have wished for an earlier enactment of the amendment of the Government Officers Ethics Act presently before the National Assembly. It encouraged the government to seek early parliamentary approval of the strengthening of the system of asset declarations intended by the amendment.

"The understandings reached between the staff team and the government are subject to approval by the Management and Executive Board of the IMF. Executive Board consideration of the second PRGF review is tentatively scheduled for end-December 2005."