A team from the International Monetary Fund (IMF), led by Mr. Mauro Mecagni, visited Kenya from May 20−June 2, 2015 to conduct discussions on the first review under the precautionary Stand-By Arrangement and an arrangement under the Stand-By Credit Facility (SBA/SCF).
The 24-month precautionary SBA/SCF with a total access of SDR 488.52 million (about US$688.3 million) was approved by the IMF’s Executive Board on February 2, 2015 (see Press Release No. 15/29).
At the end of the mission Mr. Mecagni released the following statement:
“Kenya’s economy remains resilient in the face of headwinds, with real GDP projected to grow by around 6½ percent in 2015, supported by rising infrastructure investments, lower energy prices, and a dynamic private investment environment. Inflation has remained within the government’s target range, declining to below 7 percent in May partly due to lower prices of some domestic food crops. The external current account deficit widened to about 10 percent of GDP in 2014, reflecting the strength of capital goods imports and a decline in tourism receipts owing to ongoing security concerns. Consistent with developments in international financial markets, as of end-May the Kenyan shilling depreciated against the US dollar by 7.8 percent, but appreciated against the euro by 2.8 percent from the beginning of the year. The CBK stepped up its monetary operations and has intervened in the foreign exchange market to mitigate heightened volatility of the shilling in recent weeks. Gross international reserves, equivalent to US$7.3 billion at end-May, remain adequate.
“Discussions focused on policies to support economic growth, while preserving macroeconomic stability. On the fiscal front, the implementation of the Standard Gauge Railway (SGR) project has proceeded at a faster-than-envisaged pace, but revenue has performed below expectations. Higher expenditure in the last quarter of FY2014/15 mainly reflects enhanced efforts to improve security conditions following the Garissa attack and budgetary support for the weakened tourism industry. These factors are expected to carry over into FY2015/16. The fiscal deficit is projected to rise above the original targets in both FY2014/15 and FY2015/16. The mission urged the authorities to boost efforts to mobilize domestic revenue and restrain current spending, so as to preserve room for critical priorities, notably closing infrastructure gaps, supporting an orderly devolution process, and strengthening the social safety net.
“The mission welcomed progress on a number of structural reforms envisaged under the program and encouraged the authorities to continue to work on important reforms aimed at improving the government’s cash management, advancing devolution, and consolidating the use of e-procurement for government purchases.
“Significant progress was made during the discussions for the first review under the SBA/SCF. These discussions will continue in the coming weeks. The mission team thanks the authorities for their hospitality and cooperation and for constructive discussions.
“The mission met with the Cabinet Secretary for the National Treasury, Mr. Henry Rotich; the Principal Secretary for the National Treasury, Mr. Kamau Thugge; the Deputy Governor of the Central Bank of Kenya (CBK), Mr. Haron Sirima; members of the CBK Monetary Policy Committee, and other senior government officials. Staff also had productive discussions with parliamentarians, representatives of the private sector, and development partners.”
Source: International Monetary Fund (IMF)