Kenya's economy is set to grow by some 4 percent in 2008/2009 in line with government projections, the International Monetary Fund (IMF) review mission said on Wednesday.
An IMF mission which visited the country from June 23-July 2 said the economy which suffered during the post-election crisis is regaining footing after the formation of the grand coalition government.
"While a full recovery in some sectors is likely to take time, including in tourism, the economy as a whole is already rebounding. Overall, we expect GDP to grow by some 4 percent in 2008-a respectable result given the events of the first quarter," the IMF mission said in a statement.
The IMF mission led by Thomas Krueger said the fiscal deficit in 2007/2008 (July/June) is likely to have remained within the original budget target.
"With buoyant domestic revenues, this allowed some additional expenditure to meet new spending needs emerging in the wake of the political turbulence. Looking ahead, it will be important that fiscal continues to safeguard macroeconomic stability," it said.
The visiting Fund said the economic growth in 2007 reached 7 percent, the highest growth in over two decades buoyed by sound macroeconomic policies and progress on structural reforms and a favorable 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," said the team.
The mission said it discussed the case for keeping the 2008/2009 deficit (in relation to GDP) below the level in the previous year, thereby stabilizing public debt in relation to GDP. "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," the statement said.
The Fund's team said the soaring world prices for food, fuel, and fertilizer pose new challenges for policymakers, not just in Kenya but also in most other countries.
It said the government has already announced several steps aimed at alleviating the near-term impact.
"We also discussed the possibility of designing measures more specifically targeted at the poorest segments of the population and, in the case of farmers, at improving access to credit," the statement said.
"It is important that these measures do not undermine macroeconomic stability or distort prices in a way that would hamper a longer-run supply response-an area where many see significant potential for Kenya," the mission said.
The IMF team supported the Central Bank of Kenya's recent actions to tighten monetary policy, noting that the country's apexbank needs to be prepared to take further steps "if this proves necessary to forestall second-round effects of rising food and energy prices on overall inflation". The IMF mission also lauded the government's Vision 2030 which it said sets out rightly ambitious longer-run objectives with Kenya aiming to reach middle-income status.
The team said achieving these objectives will require further structural reforms but also public spending to address crucial supply bottlenecks.
"The mission was encouraged by the widespread recognition that this needs to take place within a framework that has the private sector as the engine of growth and preserves macroeconomic stability," the statement said.
"Strong growth will also require a highly competitive tradable sector. The mission agrees that improving competitiveness depends foremost on addressing supply bottlenecks and structural reforms -with progress all the more urgent in light of the strong exchange rate."
The IMF mission said much has already been achieved in recent years on structural reforms, including with improvements in public procurement and the streamlining of business licensing requirements.
Source:Xinhua
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