News / Africa

IMF Director Lagarde Warns of Looming Shocks in Kenya

IMF's Christine Lagarde addressed Kenya's economic issues at the nation's parliament. (IMF photo by Stephen Jaffe)
IMF's Christine Lagarde addressed Kenya's economic issues at the nation's parliament. (IMF photo by Stephen Jaffe)
Reuben Kyama
The International Monetary Fund's Christine Lagarde this week urged Kenya to decentralize management and fiscal powers to address large infrastructure gaps and take the lead in regional economic integration.

As the managing director of the the International Monetary Fund (IMF), Lagarde spoke to a group of investors, diplomats and civil society organizations at several venues including Kenya's parliament in Nairobi.

Lagarde said Kenya stands a good chance to lift the region economically if it goes ahead with its reform agenda.

She commended the country’s ambitions, but warned about pitfalls in the coming years.

She said this East African nation of 40 million-plus people is vulnerable to global economic forces – particularly a slowdown in emerging markets, which once bolstered the region’s growth.

Remarkable economic gains praised

“Indeed, Kenya’s economic gains over the past few years have been nothing short of remarkable,” said Lagarde. “Coming on the heels of a delicate political transition, growth remains robus – at more than 5 percent in 2013.

“And a set of bold economic reforms have laid the foundations to lift the economy to middle-income status within the next decade – if Kenya maintains the reform momentum.”
 
The IMF has predicted that sub-Saharan Africa will grow at a rate of nearly 6 percent in 2014. Kenya grew by 5 percent in 2013.  

The IMF chief, who was on a three-day official visit to Kenya this week, underlined the Bretton Wood institution’s commitment to East Africa’s  leading economy.
 
We have been by Kenya’s side through the many challenges you have faced” said the IMF chief. “We were here during the 2009 global downturn, during the 2011 drought, and we stood with you during the Westgate attack…

“We have provided financial support through our Extended Credit Facility to deal with adverse shocks – and I am very happy that our executive board gave its seal of approval for the successful completion of the program just a few weeks ago.

Lagarde notes constant support

“We have also worked with the Kenyan government as it designed and implemented reforms, and we supported that agenda with financing, advice, and stepped-up technical assistance.

“What I am saying is that the IMF has been Kenya’s partner – through thick and thin.”
 
While in Kenya, Lagarde met with Kenyan President Uhuru Kenyatta, treasury officials, women leaders and representatives from the business community.

Kenyan officials are seeking an emergency loan from the Washington-based lenders to use it as a fall back to looming economic shocks. They say the loan, which the IMF is to disburse as a lender of last resort, will be priced on commercial terms – signalling its possible impact on Kenya’s external debt burden.

But the IMF boss advised Kenyan officials to promote fiscal discipline and encourage foreign investment in order to maintain the country’s high economic growth rate, and contribute to sub-Saharan development.

Giving Kenya the credit

“But let me be clear on this point: Kenya’s achievements are Kenya’s. Your country has had full ownership of the reform agenda. You have implemented it. You have garnered domestic support for it. And that is why it was a success.

“Now is a good time to commend Kenya on its performance. But this is not the time for complacency.

“Yes, Kenya’s future holds great promise. Looking ahead, achievements need to be deepened and broadened, so the economy can be made even more resilient, and the benefits of growth can be even more widely shared among all the Kenyan people.”

The decision by Kenya’s treasury officials to turn to the precautionary lending arrangement is one of the measures the Kenyatta government is taking to prevent a recurrence of the shocks that hit the economy in 2011 after the Central Bank of Kenya failed to adequately respond to the combination of internal and external shocks.

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