The Star (Nairobi)

Kenya: IMF Supports Counties, Warns On Debt Levels

visiting: International Monetary Fund managing director Christine Lagarde with National Treasury cabinet secretary Henry Rotich during a media briefing at the Treasury building yesterday.

THE International Monetary Fund visiting managing director Christine Lagarde has supported Kenya's county government system but cautioned that this must be done within the available public resources. Devolution of services to counties must also be transparent and should avoid duplication of functions between the central and local government, Lagarde said in a speech in forum with the private sector yesterday.

"It is imperative that devolution is done right...If done properly, this kind of devolution can bolster social cohesion, by increasing accountability in the management of public resources and improving the quality of services delivery," she said. "It can also create new private sector opportunities in the new counties. In a speech that largely hailed Kenya's economic policies, Lagarde said the country's journey to middle- income status is not over.

"There is still a long way to travel," she said adding that apart from devolution more emphasis should be placed on infrastructure development and regional integration. But she cautioned that such massive projects as the construction of a modern railway line from Lamu to neighboring countries and expansion of geothermal power generation should remain consistent with a sustainable debt position. Lagarde said Kenya's newfound natural resource wealth such as oil and minerals need to be exploited wisely and transparently.

The IMF boss backed a balance between the interest of mineral investors and the government in the development of the fiscal and regulatory regime to govern the use of revenues from natural resources. On the planned East African Community monetary union, Lagarde cautioned that the five EAC states should draw upon the experience and lessons learned from other regions in order to manage the process carefully. The IMF boss nevertheless said Kenya is now at a good position to access the international financial markets.

"Kenya has built a strong external position and is now in a favourable condition to tap international financial markets with the planned Eurobond issue. Lagarde also put a special emphasis on the education of the girl child noting that after the successful implementation of the free primary education, it is crucial that girls have the same access at the secondary and university levels.

Lagarde had in the morning met with National Treasury officials led by Cabinet Secretary Henry Rotich and Central Bank governor Njuguna Ndung'u. She was later to hold a meeting with President Uhuru Kenyatta. The IMF in 2011 extended its credit facility to Kenya to help the country's external payment position following the escalation of the global financial crisis, high prices of energy and commodities and drought.

The Extended Credit Facility amounting to about US$ 500 million approved by the IMF's executive board in January 2011 for a three-year period ending January 2014 was increased to US$ 750 million following the intensified shocks.

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