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Africa Economy: IMF forecasts Kenya's economy to grow at 6.5 pct in 2015

Xinhua, June 5, 2015 Adjust font size:

The International Monetary Fund (IMF) on Thursday forecast Kenya's economy to grow at 6.5 percent in 2015 buoyed by rising infrastructure investments, lower energy prices, and a dynamic private investment environment.

The lender, which concluded a two-week review mission in Kenya, said inflation has remained within the government's target range, declining to below 7 percent in May, partly due to lower prices of some domestic food crops.

"Kenya's economy remains resilient in the face of headwinds, with real Gross Domestic product (GDP) projected to grow by around 6.5 percent in 2015," IMF mission head Mauro Mecagni said in a statement issued in Nairobi.

The IMF review mission visited Kenya from May 20 to June 2 to conduct discussions on the first review under the precautionary Stand-By Arrangement and an arrangement under the Stand-By Credit Facility (SBA/SCF).

The 24-month precautionary SBA/SCF with a total access of 688.3 million U.S. dollars was approved by the IMF on Feb. 2.

Mecagni said the discussions focused on policies to support economic growth, while preserving macroeconomic stability.

He said the implementation of the Standard Gauge Railway (SGR) project, which is being constructed by Chinese firm, has proceeded at a faster-than-envisaged pace, but noted that revenue has performed below expectations.

According to Mecagni, external current account deficit widened to about 10 percent of GDP in 2014, reflecting the strength of capital goods imports and a decline in tourism receipts owing to ongoing security concerns.

Consistent with developments in international financial markets, as of end-May, the Kenyan shilling depreciated against the U.S. dollar by 7.8 percent, but appreciated against the euro by 2.8 percent from the beginning of the year.

The Central Bank of Kenya stepped up its monetary operations and has intervened in the foreign exchange market to mitigate heightened volatility of the shilling in recent weeks. Gross international reserves, equivalent to 7.3 billion dollars at end- May, remain adequate.

The IMF lauded progress on a number of structural reforms envisaged under the program and encouraged the authorities to continue to work on important reforms aimed at improving the government's cash management, advancing devolution, and consolidating the use of e-procurement for government purchases.

"Significant progress was made during the discussions for the first review under the SBA/SCF. These discussions will continue in the coming weeks," Macagni said.

The lender urged the authorities to boost efforts to mobilize domestic revenue and restrain current spending, so as to preserve room for critical priorities, notably closing infrastructure gaps, supporting an orderly devolution process, and strengthening the social safety net. Endi