, NAIROBI, Kenya, May 30 – The International Monetary Fund (IMF) has cleared Finance Minister Uhuru Kenyatta of wrongdoing in the budgetary estimates fiasco.
IMF Country Resident representative Chris Rogers extended the clean bill of health to the Treasury, as well as blaming the errors that run into billions of shillings on wrong coding.
“Regarding subsequent allegations that the revised estimates themselves have mistakes, I looked at the details line by line and I could not find any discrepancy; any inconsistency,” Mr Rogers said.
He however noted that it was clear there was serious concern in the budget compilation process, which needed to be rectified.
And in a further show of support, the Bank agreed to extend Sh16 billion to the Treasury.
Speaking to the media while announcing the disbursement, Mr Kenyatta said that the funds would be used to cushion the economy from the effects of the Global Financial Crisis.
“These funds will be used in strengthening our reserves position in the Central Bank and thereby making foreign exchange available for financing our import bill,” Mr Kenyatta added.
He noted that support from the IMF underpins the country’s macro-economic framework that was implemented to address the challenges emanating from the global financial crisis and the drought.
Meanwhile, the Breton Woods Institution has further raised concern that the official inflation rate in the country seriously overstates actual inflation.
While attributing this problem to the method that is used to come up with the rate in relation to the factors considered in calculating Consumer price Index (CPI), Mr Rogers observed that the reported inflation rate is more than twice the actual rate.
“This error should be corrected as fast as possible because it’s very difficult to come up with appropriate macro-economic policies with the wrong inflation rate,” he emphasised.
Mr Rogers agrees that though changing the methodology does not change the public’s feeling that inflation is high, it is important for the better management of the economy.
“You cannot manage what you can’t measure,” he stressed.
He noted that within the CPI basket are 216 commodities, but flour is primarily the basic and the one that has been affected the most by inflation, and consequently the reason why the current rate seems to be very high.
Mr Rogers further noted that there are some commodities within the basket whose prices have gone down and others that are important that are not included such as airtime, which should be considered.
“What we want is a truly representative inflation rate that advises proper macro-economic policies,” he said.