NAIROBI (Xinhua) --
The International Monetary Fund (IMF) on Tuesday
evening called on Kenya to take considerable steps to reduce the
fiscal deficit to help address the country’s rising public debt.
The IMF however
lauded Kenya on its ambitious plans for fiscal adjustment in
2017/18 and 2018/19 and noted that the size of the adjustment
would help put the public debt ratio on a downward path.
“Public debt has
risen as revenue shortfalls have not been matched by spending
cuts,” IMF’s executive board said in a statement issued after
the conclusion of the 2018 Article IV consultation and
established performance criteria for the second review under the
Stand-By Arrangement with Kenya.
The IMF and the
Kenyan authorities had agreed that a reduction in the fiscal
deficit to 7.2 percent of GDP in 2017/18 and further to 5.7
percent of GDP in 2018/19 from 8.8 percent in 2016/17 would be
The lender said
adjustment efforts should focus on both expenditures and
revenues to preserve space for planned growth enhancing public
investment and key social programs, including the Big Four
agenda of food security, affordable housing, manufacturing and
directors lauded Kenyan authorities for maintaining
macroeconomic stability and sustained economic growth in recent
years, together with gains in financial inclusion and poverty
shocks reduced the pace of expansion in 2017, the economy is
recovering and medium-term growth prospects remain favorable,”
the lender said.
The IMF directors
encouraged further repeal or significant modification of
interest rate controls and measures to strengthen the financial
sector and business environment to safeguard the gains achieved.
that any modification should include the removal of the link
between the lending rate cap and the central bank policy rate,
the removal of a floor on deposit rates, and an increase of the
lending cap to a level that protects consumers from predatory
practices,” said IMF.
“The six month
extension of the Stand By Arrangement will give the authorities
more time to undertake these critical reforms,” the IMF said.
Kenya had received
approval to access the facility in March 2016 to provide a
policy anchor for continued macroeconomic and institutional
reform, and help mitigate the impact of potential exogenous
shocks to the economy if they were to materialize.
The board also
welcomed the government’s progress in strengthening the banking
supervision framework, and encouraged continued efforts in this
The directors said
Kenya’s medium-term growth prospects are favorable, supported by
infrastructure investment and an improving business environment.
However, they said
continued strong growth and macroeconomic stability hinge on the
implementation of reforms.
Africa is groaning under its worst debt
burden since 2001: Once again the outlook is grim