MISSUE NO. 3616 

April 19 - 24, 2013


 Coastweek   Kenya

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I.M.F. approves U.S. $108.5 million
dollars to support Kenya’s growth

Kenya’s economic growth has kept a good pace despite
the slowdown of exports to and tourism from Europe

NAIROBI (Xinhua) -- The International Monetary Fund (IMF) has approved 108.5 million U.S. dollars under the extended credit facility to support ongoing economic reforms in Kenya.

The IMF said the money was approved by the Executive Board after the completion of the latest review, bringing the total disbursements under the arrangement to 628.2 million dollars.

“In completing the review, the executive board also granted a waiver for the nonobservance of the continuous performance criterion on new central government and central government guaranteed external payment arrears,” the IMF said in a statement received on Wednesday.

The Bretton Wood institution said the East African nation has stayed the course in its economic reforms, with good results, noting that the inflationary pressures have been tamed.  

The IMF said Kenya’s economic growth has kept a good pace despite the slowdown of exports to and tourism from Europe.

According to the IMF, international reserves are on the rise and the deficit of the external current account has shrunk significantly - excluding capital-goods imports that have surged because of oil exploration.

It said the public debt-to-gross domestic product ratio has declined, despite the large budgetary costs of implementing the new constitution, preparing for the March elections, and the recent wage increases in the civil service.

“Stronger growth is expected in 2013 supported by good weather conditions. With firmer expectations of low inflation, there is scope for further monetary easing, although the Central Bank of Kenya will need to remain vigilant to the risks of possible adverse shocks or a reversal of capital flows,” IMF said.

It said fiscal consolidation should continue by lowering non- priority expenditures and boosting revenue mobilization through improvements in tax administration, the introduction of a new value-added tax law and a financial transaction tax.

Performance under Kenya’s economic program was favorable through end-December 2012. The fiscal outcome was in line with the program, international reserves exceeded the target, while monetary policy was eased appropriately, the IMF said.

The Bretton Wood institution said the Kenyan authorities have also made good progress with their structural reform efforts in the areas of public financial management and tax reform, adding that financial sector reforms and the reform of the pay for civil servants have also recently advanced.

“Financial soundness indicators have remained favorable. Nevertheless, policies should focus on closely monitoring the health of the banking system and adapting banking supervision to growing regionalization, while the government seeks to complete the demutualization of the Nairobi Stock Exchange,” IMF said.

It said risks from global financial and economic conditions have lessened, adding that the prospects for commercially-viable oil discoveries could further improve the medium- to long-term outlook, which will require policies to promote diversified and balanced growth to avoid excessive reliance on natural resources.


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