Via IMF (Den Internationale Valutafond)

IMF Staff Completes Virtual Mission to Kenya







November 20, 2020







End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.





  • Kenya has suffered an unprecedented shock as a result of the COVID-19 pandemic.
  • The economy has been picking up from a trough in April-May, but the normally resilient services sector continues to face challenges, and the outlook remains uncertain due to COVID-19.
  • There is broad agreement on the key principles that could underpin a Fund supported program to help the next phase of the country’s COVID-19 response and a strong multi-year effort to stabilize and begin reducing debt levels.
  • Discussions will continue in the period ahead.

Washington, DC:
A staff team from the International Monetary Fund (IMF) led by Mary Goodman
conducted a virtual mission to Kenya from October 27 to November 17, 2020,
to undertake negotiations on a 3½ year Extended Fund Facility
(EFF)/Extended Credit Facility (ECF) arrangement.

At the end of the visit, Ms. Goodman made the following statement:

“Discussions took place against the backdrop of the unprecedented shock
that Kenya has suffered due to the COVID-19 pandemic.

As elsewhere in the world, the pandemic has disrupted lives and livelihoods
and remains a major risk to public health. Actions taken by the Kenyan
authorities earlier this year – easing monetary policy, supporting
broad-based loan restructuring for borrowers hit by the shock, temporarily
cutting tax rates and launching programs to support vulnerable groups –
have played an important role in cushioning the impact on the economy.
Financial assistance from international financial institutions, including
the IMF, has supported this effort. Kenya’s development goals have
nonetheless suffered a significant setback, and the country faces an
arduous task of returning to a path of sustained and inclusive growth. The
shock has also crystallized debt-related vulnerabilities and exposed
weaknesses in some state-owned enterprises (SOEs).

“Economic activity has started to show signs of recovery.
In the second quarter of 2020, real GDP contracted by 5.7 percent
year-on-year. Agriculture remained strong thanks to above-average rainfall,
but the normally resilient services sector suffered a significant
contraction in output. Activity has generally been picking up from the
trough in April-May, but with remaining weakness in the tourism and
education sectors among others. Kenya’s external accounts have remained
resilient due to solid growth in goods exports, particularly horticulture
and tea, and in remittances, and due to reduced imports, partly resulting
from lower oil prices. Inflation has remained in check at 4.8% year-on-year
in October, while financial sector vulnerabilities have been contained and
the banking system remains well capitalized overall. Key challenges are
reduced government tax revenue and rising public debt, which reached 65.9
percent of GDP in FY19/20.


“The mission discussed with the authorities a program to support the
next phase of their COVID-19 response.

The program would provide resources to protect vulnerable groups and would
reduce debt vulnerabilities over time through a multi-year fiscal
consolidation centered on raising tax revenues. It would also advance the
structural reform and governance agenda and address weaknesses in some SOEs
that have been exacerbated by the COVID-19 shock. Finally, it would
strengthen the monetary policy framework and support financial stability.
The program design would incorporate elements of flexibility to accommodate
the high uncertainty about the evolution of COVID-19 and the path of
economic recovery.


“The mission reached agreement in many areas; discussions on the
remaining areas will continue in the coming period.

There is broad agreement on the policy objectives that would underpin a
Fund-supported program. Remaining issues to firm up include the scope of
SOE weaknesses and plans to revise the budget for FY2020/21 to address
these and other pressure points as well as some elements of the medium-term
strategy.
Technical work will continue in the period ahead, with a view to
reaching agreement on a program that could be presented to the Fund’s
Board in early 2021.”

The team thanks the authorities for their hospitality and constructive
discussions.

The team met with Cabinet Secretary for the National Treasury, Mr. Ukur
Yatani; Governor of the Central Bank of Kenya (CBK), Dr. Patrick Njoroge;
Head of the Public Service, Mr. Joseph Kinyua; the Principal Secretary for
the National Treasury, Dr. Julius Muia; Deputy Governor of the CBK, Ms.
Sheila M’Mbijjewe; Auditor General, Ms. Nancy Gathungu; and other senior
government and CBK officials. Staff also had productive discussions with
representatives of the private sector, civil society organizations, and
development partners.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Lucie Mboto Fouda

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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