16 July 2018

Kenya: IMF Ends Kenya Review, Puts Off Final Statement

The International Monetary Fund (IMF) has completed reviewing the performance of its Sh150 billion forex insurance programme with Kenya as the Treasury grapples with the multilateral lender's key demand of scrapping interest rate caps.

Without giving details, in an unusual move the IMF said it had handed over the review report to the Kenyan government before considering its publication.

The government is expected to wrestle with MPs, some of whom have vowed not to support removal of the restrictions on interest rates.

"The authorities need more time to consider the publication of the staff report and the related press release," said the IMF in a statement.

The IMF review came even as the country is on its way to meeting some of the set targets but could fall short of others such as those relating to the review of interest rate controls and setting a new approach to manage interest rates through the central bank.

The outstanding issues following the IMF extension of the programme period to September this year included the rate caps, setting up of an interest corridor - which is dependent on the former - as well as ensuring the fiscal deficit is on target to 7.2 per cent of the gross domestic product.

In the year ending June 2017, Kenya's fiscal deficit stood at 9.1 per cent, thereby exceeding the IMF target by more than two percentage points.

Treasury secretary Henry Rotich said during the presentation of the Budget Statement last month that the deficit was on the way to hitting the 7.2 per cent target, though the final figure will only be publicly known after a review of the 2017/18 fiscal year.

The IMF had also expressed fear that the public debt was rising at a rapid pace, projecting that it could hit 60 per cent by the end of the calendar year. However, the multilateral lender noted that the debt was still within the ceilling of 74 per cent.

"On June 13, 2018, the Executive Board of the International Monetary Fund concluded the consideration of the 2018 Article IV Consultation and Establishment of Performance Criteria for the Second Review under the Stand-By Arrangement with Kenya.

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