Kenya set for talks with IMF on fresh financing, reform plans

Kenya is set to discuss with the International Monetary Fund (IMF) about the next financing and reform programme in June after the previous one ended last year.

IMF resident representative Ragnar Gudmundsson said Kenya was interested in a fallback financial facility in case of any deterioration in the current account deficit that would put pressure on the exchange rate.

“We know that Kenya is interested in a precautionary arrangement as an insurance mechanism to absorb any shocks in case the global environment becomes more challenging. But no details have been discussed and this is among the things to be discussed in June,” said Mr Gudmundsson.

The discussion will be part of the Article 4 consultations where the government and the financier agree on the terms of engagement in the medium term.

The IMF said it was satisfied with Kenya’s reform programme that has seen public finance streamlined at the national and county levels.

“Kenya has made significant progress in public financial management. We understand the implementing regulations will be presented in Parliament in the next few days. We understand also that the Treasury Single Account (TSA) is going to be operational from the next financial year,” he said.

The TSA will bring all ministry and agency accounts under one bank account so that funds are only disbursed when they can be absorbed by the intended project.

Presently disbursements running ahead of actual spending have distorted public finances, at times forcing domestic borrowing while money is lying idle in other accounts.

READ: Kenya faces an uphill task in bid for 7pc growth

This has seen ministries return money to the Treasury at the end of fiscal the year or engage in a frantic spending rush or largely non-core activities so as not to lose the allocations altogether.

TSA is expected to have a positive impact on interest rates spreads by matching domestic borrowing to actual financing needs. Treasury secretary Henry Rotich recently said TSA would be rolled in July when the next financial year starts.

On Tuesday, Mr Rotich said Kenya’s macroeconomic economic situation was stable and growth was expected to be over five per cent this year, just above the 5.0 per cent estimated for last year.

The IMF has projected that Kenya’s economic expansion would reach 6.3 per cent this year, up from 5.7 per cent estimated for last year.

However, Kenya Association of Manufacturers CEO Betty Maina said agriculture and manufacturing were underperforming, belying the rosy projects.

Mr Rotich said that agriculture and manufacturing were among the priority areas this year, noting the one million-acre irrigation scheme and reforms to cut the cost of doing business currently under way.

Industrialist Manu Chandaria said security was another area that needed attention.

IMF deputy director of African Department Abebe Selassie said Kenya was still in a position to issue its Sh128-174 billion sovereign bond as way to diversify its funding sources.