IMF Staff Completes Visit to Kenya
March 3, 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.
- Significant progress was made during the visit, and discussions will continue in the coming period.
- Discussions focused on the policies needed to support the authorities’ ambitious reform agenda, which aims to further bolster Kenya’s strong and inclusive growth.
- There is broad agreement on the main principles of a plan for growth-enhancing fiscal consolidation that would cut waste and boost revenues to enable priority spending while reducing the deficit to below 4 percent of GDP by FY2022/23.
A staff team from the International Monetary Fund (IMF), led by
Benedict Clements, visited Kenya from February 19-March 3, 2020, to
conduct the Article IV consultation discussions with the authorities
and undertake negotiations on a new precautionary three-year Stand-By
Arrangement/Stand-By Credit Facility.
At the end of the visit, Mr. Clements made the following statement:
“Kenya’s economy continues to perform well. Real GDP growth was an
estimated 5.6 percent in 2019, driven by the continued resilience of the
service sector. This helped offset a slowdown in agriculture due to delayed
rains in the first half of the year and excessive rains later in the year.
Headline inflation averaged 5.2 percent in 2019 and stood at 6.4 percent in
February 2020, mainly driven by food prices. Food inflation has remained
elevated (averaging 8.4 percent between April 2019 and February 2020) but
is expected to decline with normalizing weather. The external current
account deficit narrowed further to 4.6 percent of GDP from 5.0 percent in
2018, mainly due to lower imports of capital goods and petroleum products,
which more than offset a decline in goods exports (e.g., in tea and
coffee). Remittances remained strong. External buffers are healthy, with
foreign exchange reserves increasing to US$9.1 billion (5.4 months of
imports) at end-2019.
“The banking sector remains well-capitalized and liquid. The system’s core
and total regulatory capital to risk-weighted assets stood at 16.8 and 18.8
percent, respectively, as of December 2019. Liquidity risk has eased with
improved distribution of liquidity across all banks. Lending to the private
sector started to gain momentum in 2019, reaching 7.3 percent year-on-year
in January 2020. Credit is expected to rise further following the removal
of interest rate controls in November 2019. The ratio of nonperforming
loans has declined from its peak of 12.9 percent in April 2019 to 12.0
percent in December and should continue to fall with the recent repayment
of pending bills, recovery efforts by banks, and higher credit growth. The
banking system has been gradually consolidating, with two significant
mergers and acquisitions transactions finalized in 2019.
“The fiscal deficit rose slightly in FY2018/19 to 7.7 percent of GDP and
nominal public debt reached 62.1 percent of GDP. The authorities target a
reduction of the budget deficit to 6.3 percent of GDP in FY2019/20, with
revenue boosted by dividend transfers from state-owned enterprises and
expenditure curtailed by a reduction in inefficient spending. Important
progress was made on reducing the stock of pending bills from previous
“Discussions focused on the policies needed to support the authorities’
ambitious reform agenda, which aims to further bolster Kenya’s strong and
inclusive growth. The discussions covered revenue and expenditure policies
needed to reduce the deficit this fiscal year and achieve further fiscal
consolidation over the next three years to reduce debt vulnerabilities
while preserving high-priority, growth-enhancing public investment and
social spending; public financial management reforms to increase the
efficiency, effectiveness, transparency, and accountability of public
spending; transformation of the banking system through the Banking Sector
Charter to further strengthen financial stability and increase access to
financing, including for small businesses; modernization of the monetary
policy framework; steps to improve governance and strengthen the
anti-corruption framework; and reforms to boost growth and improve gender
“Significant progress was made during the visit, and discussions will
continue in the coming period.
There is broad agreement on the main principles of a plan for
growth-enhancing fiscal consolidation that would cut waste and boost
revenues to enable priority spending while reducing the deficit to
below 4 percent of GDP by FY2022/23 as targeted in the authorities’
draft Budget Policy Statement. Technical work will continue to firm up
underpinnings of the plan, which could be supported by a Fund
The team thanks the authorities for their hospitality and constructive
The team met with President Uhuru Kenyatta, 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; and 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
PRESS OFFICER: Lucie Mboto Fouda
Phone: +1 202 623-7100Email: MEDIA@IMF.org