NAIROBI, Kenya, Aug 4 – Kenya’s economy showed signs of acceleration in the first quarter of 2018, growing by 5.7 per cent compared to 4.9 per cent same period in 2017.
According to a visiting delegation from the International Monetary Fund (IMF), the conclusion of the prolonged election period, favourable weather conditions and a continued recovery in tourism have given the economy impetus in the first quarter.
The review by IMF comes days after Central Bank of Kenya projected the economy will grow by 6.2 percent in 2018 citing similar underlying factors.
“Inflation has remained within the authorities’ target range (5+/-2.5 percent) since July 2017 as better weather conditions have brought down food inflation. Headline CPI growth was 4.3 percent year on year as of June 2018, while core inflation remained low at 3.6 percent y/y,” said IMF Head of Delegation to Kenya, Benedict Clements.
The delegation, which met with National Treasury and Planning Cabinet Secretary Henry Rotich, CBK Governor Dr. Patrick Njoroge, Principal Secretary for the National Treasury, Dr. Kamau Thugge among other officials, was in the country to hold discussions on the second review under a precautionary Stand-By Arrangement (SBA).
On March 14, 2016, the Executive Board of the International Monetary Fund (IMF) approved a SDR 709.259 million (about US$989.8 million, or 131 percent of Kenya’s quota) 24-month Stand-By Arrangement (SBA).
The first review of the SBA was completed on January 25, 2017. On March 12, 2018, the Executive Board of the International Monetary Fund approved the Kenyan authorities’ request for a 6-month extension of the SBA to September 14, 2018 to allow additional time to complete the outstanding reviews.
“Fiscal targets for FY2017/18 under the program were met,” noted Clements. “The budget deficit for the fiscal year ending in June 2018 was Sh614.6 billion (equivalent to 7.0 percent of GDP), within the target under the program. This represents a significant tightening from the previous year’s deficit of 9.0 percent of GDP.”
The team, however, said revenues significantly underperformed, coming in 2.2 percent of GDP lower than program targets.
Government officials explained that the current account deficit will narrow as good weather improves food supply, reducing food imports and boosting agricultural exports.
The completion of the Mombasa-Nairobi SGR has also contributed to a lower current account deficit, the authorities noted.
In the banking sector, IMF says non-performing loans remains high at 12 percent in June 2018, though declining in recent months.
“Higher non-performing loans have been driven by weaker economic activity in 2017, and delayed payments from the government and private sector.”