July 9, 2014
IMF COMMUNICATIONS DEPARTMENT |
| Media Relations |
|---|
| E-mail: media@imf.org |
| Phone: 202-623-7100 |
An International Monetary Fund (IMF) mission led by Mr. Mauro Mecagni visited Nairobi from June 25 to July 9 to conduct the 2014 Article IV Consultation discussions1. The mission met with Hon. Henry Rotich, Cabinet Secretary of the National Treasury, Professor Njuguna Ndungu, Governor of the Central Bank of Kenya, the Speakers of the Senate and the National Assembly, senior government officials, and representatives of civil society, the private sector and development partners. The mission team wishes to thank the authorities for their warm hospitality, the excellent collaboration, and the high quality discussions.
At the conclusion of the mission, Mr. Mecagni issued the following statement:
“Kenya’s economy has continued to grow, with a pick-up in credit to the manufacturing sector and renewed foreign investor interest, notably in the extractive industries. Inflation remains within the central bank’s target band, reflecting the implementation of sound monetary policy, and has contributed to the stability of the country’s currency. Following a successful sovereign bond issue, international reserves have reached a level of more than five months of import coverage. Kenya’s expanding financial sector remains robust, and the ongoing process of financial inclusion has opened up the possibility of extending credit at more affordable rates to small and medium-sized enterprises. Efforts to develop Nairobi into a regional hub for financial services have advanced with the strengthening of the Anti-Money Laundering/Combating the Financing of Terrorism framework and Kenya’s recent graduation from the Financial Action Task Force’s monitoring process. At the same time, the economy faces some challenges, notably low rainfall and security-related concerns that have affected tourism.
“Despite good revenue performance, the 2013/14 central government deficit remained unchanged in percent of GDP on account of higher wages, security spending and larger transfers to counties. Kenya’s debt remains sustainable, and gradual fiscal consolidation will help ensure that the country is on track to meet the convergence criteria specified in the East African Monetary Union Protocol.
“Devolution is a major undertaking that holds great promise for the Kenyan population. It provides the opportunity to foster inclusive growth, increase job creation and address inequality. While considerable progress has been made during the first year of devolution--with much-needed investments in health, roads and access to water in specific counties—accountability, compliance with the legal framework and implementation capacity need to be further strengthened to effectively maximize the benefits of devolved resources, improve the provision of public services and mitigate fiscal risks. Budget preparation and execution mechanisms are being developed, and oversight by the National Treasury and independent constitutional offices is contributing to greater transparency and accountability in public finances.
“Kenya’s strong reform record and economic performance in recent years has laid the ground for sustainable growth that would enable the country to reach its ambitious Vision 2030 development targets. In this setting, policies need to consolidate macroeconomic stability, address infrastructure gaps, and support the integration of Kenya in the global economy. As the country remains vulnerable to risks such as weather-related shocks and potential volatility in capital flows, focusing policies on the following priorities would help strengthen resilience and support sustained growth:
“On its return to Washington D.C., the team will prepare a staff report that is tentatively scheduled for discussion by the Executive Board in late September.”
1 The completion of the Article IV Consultation is subject to the discussion by the IMF Executive Board.
