NAIROBI, (CAJ News) – THE International Monetary Fund (IMF) has expressed satisfaction with Kenya’s economic performance.
The Bretton Woods institute’s Executive Board has completed the first review of Kenya’s performance under the program supported by the Stand-By Arrangement (SBA) and an Arrangement under the Standby Credit Facility (SCF).
The IMF’s Executive Board approved the 12-month SBA/SCF with a combined total access of about US$687 million in February.
Following the Executive Board discussion on Kenya, Min Zhu, IMF Deputy Managing Director and Acting Chair, said Kenya’s economic performance had remained satisfactory despite headwinds from rising volatility in global markets and domestic security challenges.
“Real GDP growth has been robust, and, notwithstanding the recent shilling depreciation, inflation has remained within the authorities’ target range. External buffers to date have remained adequate,” he said.
Zhu said authorities’ fiscal program for 2015/16 sought to address persistent security challenges and infrastructure bottlenecks while preserving macroeconomic stability.
The authorities’ commitments to contain current spending and mobilize additional revenue are welcome and should contribute to mitigating excess demand pressures, he added.
“Over the medium term, continued efforts are needed to boost fiscal space to accommodate development priorities and an orderly process for devolving fiscal responsibility to lower tiers of government while maintaining public debt sustainability.”
Zhu said public financial management reforms—in particular, strengthening capacity at the National Treasury’s Debt Management Office and the introduction of the Treasury Single Account—should be decisively implemented.
“The authorities have taken a number of steps to strengthen expenditure control and improve the efficiency of public spending. However, counties’ access to the Central Bank of Kenya’s (CBK) overdraft facility could complicate monetary policy implementation.”
The IMF executive said the authorities’ commitment to improve the central bank’s stress testing framework is important to address potential risks associated with balance-sheet effects of the recent currency depreciation.
“Efforts to strengthen supervision of banking groups operating outside Kenya are also welcome in light of the rapid expansion of Kenyan banks abroad. The recent exchange rate volatility puts a premium on monitoring corporate borrowing from abroad.”
– CAJ News