Africa Focus: IMF lauds Kenya's economic recovery

NAIROBI, Oct. 3 (Xinhua) -- The International Monetary Fund (IMF) has commended the 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 late Thursday, policies and progress made in process have virtually contributed to strong economic growth and poverty reduction in the east African country.
The IMF Executive 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.
"The directors regretted the interruption of economic activity that resulted from the post-election turmoil, but were encouraged that a recovery seems to be under way following the return to political stability," said the IMF.
The fund, however, faulted the government's approach to reforms undertaken over the last decade, terming them overly reactive and overloaded.
"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 MDGs," report said.
The directors, who met in Washington on Sept. 10, recommended far-reaching structural reforms and infrastructure improvements to achieve Vision 2030 growth objectives.
"Priority reforms should include those in the financial sector, public financial management and the regulatory and trade regimes," said the report.
Public and private sector partnerships were said to be vital in building Kenya's infrastructure. IMF noted that directors supported focus of 2008/09 budget on removing growth bottlenecks and improving social cohesion.
The IMF board 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 added 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.
The report further showed 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.
The IMF welcomed improved ownership and performance in recent years and believed that the 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 coalition government.