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IMF team leaves Kenya without word on shilling caution

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The Central Bank of Kenya building in Nairobi. FILE PHOTO | NMG

The International Monetary Fund (IMF) has completed reviewing the performance of its Sh150 billion forex insurance programme with Kenya, which expires in September.

The IMF team met Treasury and other State officials in the latest round of review.

The review was expected to see Kenya allowed or denied further access to the standby facility.

In a statement issued Friday after the exercise, the IMF did not mention the new status of the facility.

The Bretton Woods firm, however, said Kenya authorities “reiterated their commitment to macroeconomic policies that would maintain public debt on a sustainable path, contain inflation within the target range, and preserve external stability.”

“Discussions focused on fiscal policies to achieve the authorities’ fiscal deficit target of 5.7 per cent of GDP in financial year 2018/2019, interest rate controls and structural reforms aiming to ensure the sustainability of investment-driven, inclusive growth,” said the IMF.

“Significant progress was made during the visit, and discussions will continue in the coming weeks.”

READ: CBK now says shilling does not need IMF guarantee

READ: WAGACHA: Why Kenya needs a credit policy and change of attitude

Suspended

The IMF revealed this year that the credit had been suspended mid-last year before the March 14 expiry date because of failure to meet the agreed fiscal deficit reduction targets.

The credit facility is tied to the Treasury’s fulfilment of the promise it made to cut back on the fiscal deficit through a raft of measures, including public spending cuts.

On Tuesday this week, Central Bank of Kenya (CBK) Governor Patrick Njoroge said the Kenyan economy is well protected against capital outflows and does not need the IMF’s precautionary credit facility.

Dr Njoroge said while the facility would be crucial to provide liquidity to the financial system if necessary, the country’s external position was strong at the moment, underpinned by strong remittances and exports.

Request

The IMF in mid-March approved Kenya’s request for a six-month extension of the facility, which is due to expire in March.

Kenya, in return, promised to repeal the law that caps interest rates within the extended six-month window that expires in September.

“The IMF is in town and they are reviewing our performance. We are confident in terms of our objectives…but at this point, we don’t need the money from that perspective. We have 5.9 months of import cover. We are pretty comfortable in that sense,” Dr Njoroge said.