A staff team from the International Monetary Fund (IMF), led by Benedict Clements, visited Kenya from 19 February to 2 March 2018, to conduct the 2018 Article IV consultation and hold discussions on continued IMF support to Kenya, including the authorities’ request for an extension of the current Stand-By Arrangement (SBA).
Kenyan authorities have requested a six-month extension of the SBA, previously due to expire 13 March 2018, to allow for more time to complete outstanding reviews of the IMF-supported program. On the back of this request, authorities have committed to policies to achieve the program objectives, including reducing the fiscal deficit and substantially modifying interest controls.
Clements, at the end of the visit, said, “Kenya’s economy continued to perform well in 2017 despite a severe drought and a prolonged election period; however, real GDP growth is estimated to have slowed to 4.8 percent for the year as a whole. Growth was mainly supported by public investment spending and solid non-agriculture sector performance. Inflation has declined to below the mid-point of the authorities’ target range, reflecting a substantial decline in food inflation and appropriate monetary policies. Annual headline inflation declined to 4.5 percent in February from 6.3 percent in 2016. The banking system has remained stable, and the Central Bank of Kenya (CBK) has continued to strengthen the financial system through its reform program.”
The team met with President of Kenya, Uhuru Kenyatta, Cabinet Secretary for the National Treasury, Henry Rotich, the Governor of the CBK, Patrick Njoroge, the Principal Secretary for the National Treasury, Kamau Thugge, the Deputy Governor of the CBK, Sheila M’Mbijjewe, and other senior government and CBK officials.
“The IMF team urged the authorities to review the interest rate controls introduced in September 2016 with a view to abolishing them or substantially modifying them. The controls have contributed to slow overall credit growth to the private sector, and lower access to credit by SMEs and individuals. In addition, interest rate controls are undermining the effectiveness of monetary policy aimed at ensuring price stability and supporting sustainable economic growth,” added Clements.