Results from a meeting, held on 3 July, between the IMF mission and key stakeholders in Kenya's economy revealed that the country's growth will drop to 4% in 2008, from 7% last year.
After a meeting between the IMF mission and key stakeholders in Kenya's economy, a statement was issued concluding: "With the formation of the grand coalition government, the economy is regaining its footing. While a full recovery in some sectors is likely to take time, including tourism, the economy as a whole is already rebounding. Overall, we expect GDP to grow by some 4% in 2008 - a respectable result given the events of the first quarter.”
The assessment is an outcome of a meeting between IMF staff mission, headed by Thomas Krueger, who visited Kenya during June 2-23July, 2008, to conduct discussions for the 2008 Article IV consultation. The mission met with Prime Minister Raila Odinga, Finance Minister Amos Kimunya, Central Bank Governor Njuguna Ndung'u, and other senior government officials, as well as with representatives of the business community, labour unions, civil society and Kenya's development partners.
The IMF also noted: “Economic growth in 2007 reached 7%, the highest growth in over two decades.” The lender attributed the strong growth of East Africa's most solid economy, to its sound macro-economic policies and progress on structural reforms, as well as benefits that accrued from a favourable external environment.
“The strong momentum was interrupted, however, by the post-election turbulence in early 2008. This left a severe human toll and its economic effects were evident not only in Kenya, where tourism, agriculture, and transport were particularly affected, but also in the region as transport links were interrupted,” the mission added. At least 1000 people were brutally killed, and property worth billions of dollars was lost during the historical violence.
The mission discussed the case for keeping the 2008/2009 deficit (in relation to the country's wealth) below the level of the previous year, thereby stabilising public debt in relation to wealth (GDP). The IMF said: “With a solid domestic revenue base, this should be achievable even while addressing recovery-related spending needs and accommodating higher outlays for much needed infrastructure projects.”
On helping Kenya deal with rising prices of food and fuel and fertilisers, the IMF recommended that the government should design measures more specifically targeted at the poorest segments of the population and, in the case of farmers, at improving access to credit.
However, it warned that it is crucial that government does not let the measures affect the economies macro-economic stability or distort prices negatively.
