afrol News, 2 October - International Monetary Fund executive directors has commended Kenyan government for maintaining economic stability in wake of post-election turmoil in early 2008, and for its sound macroeconomic policies and progress with economic reform in recent years.

According to an assessment report issued by IMF yesterday, policies and progress made in process, have virtually contributed to strong economic growth and poverty reduction in east African economic power.

Directors regretted interruption of economic activity that resulted from post-election turmoil, but were however encouraged that recovery seems to be underway following return to political stability.

"Directors noted, however, that downside risks remain, particularly from rising food and fuel prices and weakening global demand. They underscored that sound policies and continued structural and governance reforms are essential to maintain macroeconomic stability, restore strong growth, and advance toward Millennium Development Goals," reports says.

It notes that directors supported focus of 2008/09 budget on removing growth bottlenecks and improving social cohesion. At same time, they stressed importance of fiscal restraint in light of strong recovery and inflationary pressures, and urged authorities to accommodate spending priorities within a smaller-than-budgeted deficit, it says.

It adds that directors encouraged Kenyan authorities to adopt a fiscal anchor based on ratio of total public debt to GDP in light of planned sovereign bond issue.

"They advised that size, timing, and modalities of planned international sovereign bond issue be carefully considered to safeguard debt sustainability, and that proceeds be used for high-return infrastructure projects. In this context, directors stressed importance of establishing a comprehensive debt management strategy, and advised authorities to continue to seek concessional financing as best source for public investment," it says.

It furthers shows that directors welcomed recent tightening of monetary policy and authorities' readiness to tighten further to prevent second-round effect of rising food and fuel prices.

It states that they urged authorities to take more decisive steps to reduce monetary growth to rates consistent with their inflation objective.

According to report, directors supported authorities' plans to reform monetary operations framework, including through the introduction of inflation targeting, but however, they stressed that more analytical work is needed and institutional and statistical pre-conditions should be put in place before inflation targeting is adopted.

It addes, "directors agreed that far-reaching structural reforms and infrastructure improvements will be required to achieve the authorities' Vision 2030 growth objectives. Priority reforms should include those in the financial sector, public financial management, and the regulatory and trade regimes."

On issue of public-private partnerships, report says directors believe it can play a useful role in building Kenya's infrastructure, provided contractual arrangements are transparent and the contingent liabilities are fully assessed.

Report concludes that IMF welcomed improved ownership and performance in recent years and believed that Fund should continue to play a key role in helping the authorities design and implement sound policies.

Kenya's economy had been under threat by post election conflict, which started early this year, resulting in formation of a model unity government, that brought president Moi Kibaki in a power sharing with opposition's Raila Odinga as prime minister.

By staff writer

© afrol News

Related pages and feature

Current afrol News Top Stories