IMF says Kenya’s ex­ter­nal po­si­tion ‘strong’

The Gulf Today - Business - - INTERNATIONAL -

NAIROBI: The In­ter­na­tional Mon­e­tary Fund (IMF) con­sid­ers that Kenya’s ex­ter­nal po­si­tion is strong, its rep­re­sen­ta­tive in Nairobi said, adding that the fund would con­tinue to sup­port its re­form ef­forts even though a stand-by loan deal has ex­pired.

Kenya had se­cured a six-month ex­ten­sion in March of the $989.8 mil­lion ar­range­ment. How­ever, the IMF set con­di­tions for a fur­ther ex­ten­sion, in­clud­ing the re­peal of a cap on com­mer­cial lend­ing in­ter­est rates which was im­posed in 2016, a move that par­lia­ment re­jected in a fi­nance bill last month.

Pres­i­dent Uhuru Keny­atta sent the bill back to par­lia­ment, but what hap­pens next re­gard­ing the rate cap is not yet clear.

IMF rep­re­sen­ta­tive Jan Mikkelsen con­firmed what the gov­ern­ment said on Thurs­day: that the deal was over.

“The sec­ond re­view of the Imf­sup­ported pro­gramme has not been com­pleted, and the pro­gramme will ex­pire to­day,” he told Reuters. “It should be stressed that Kenya’s ex­ter­nal po­si­tion re­mains strong and for­eign ex­change re­serves are at a very com­fort­able level.”

For­eign ex­change re­serves stood at $8.56 bil­lion at the end of last week, equiv­a­lent to 5.71 months’ worth of Kenyan im­ports, cen­tral bank data showed. The bank is re­quired by law to hold re­serves worth a min­i­mum of four months of im­port cover.

The cen­tral bank ex­pected the cur­rent ac­count deficit to shrink to 5.4 per cent of gross do­mes­tic prod­uct at the end of this year, from 5.8 per cent in June, Gover­nor Pa­trick Njoroge said in July.

Kenyan of­fi­cials have played down the sig­nif­i­cance of the ex­piry of the deal, which was agreed in 2016 to help cush­ion the econ­omy in case of un­fore­seen ex­ter­nal shocks that could upset the bal­ance of pay­ments. No funds were ever drawn down.

How­ever, Fi­nance Min­is­ter Henry Rotich said that talks with the Wash­ing­ton-based fund would now fo­cus on the next type of fa­cil­ity Kenya could se­cure. “The IMF will con­tinue to sup­port Kenya’s re­form ef­forts through pol­icy ad­vice and ca­pac­ity de­vel­op­ment,” Mikkelsen said, with­out giv­ing more de­tails.

Ka­mau Thugge, the prin­ci­pal sec­re­tary at the fi­nance min­istry, had said on Thurs­day that the ex­piry would not hurt the econ­omy.

Rotich tried to re­peal the rate cap in his June bud­get, but par­lia­ment voted to keep the up­per limit while get­ting rid of a min­i­mum de­posit rate it had pre­vi­ously im­posed.


A fuel sta­tion in Nairobi, Kenya.

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