The Central Bank of Kenya (CBK) has downplayed the recent assessment of Kenya’s fiscal management by the International Monetary Fund (IMF) insisting the prerogative on policy adjustment remains in the hands of State actors.
This was in response to a recent review of exchequer books by the multi-lateral lender who in part observed instances of policy misalignment while, on the other hand, proposing far reaching measures to contain further fiscal slippages.
Nevertheless, the reserve bank made note of key recommendations which whilst painful, have the scope to spur economic expansion.
“The policy makers are the ones to decide what’s good for the economy or not…whether we are in an IMF program or not. We don’t need someone asking us to sign a document by the dotted line,” CBK Governor Patrick Njoroge told a news conference on Tuesday.
“It should never work that way. Frankly, here in Kenya, it shouldn’t work that way. Not on our watch”.
Earlier in the month, the IMF published a fiscal transparency review of Kenya’s fiscal management at the request of government highlighting damning observations and voting for tough measures.
The IMF, for instance, made note of an estimated 1000 incomplete projects requiring an approximate Ksh.1 trillion to round off, faulting delayed payments to contractors for the drag.
However, the CBK reckons the report barely scratches the surface on misalignment in public investments, majority of which are already evident in public circles.
“The question is not on whether projects have been finished or not. That’s just the beginning. We’ve seen projects with no outcome to commiserate with undertaken borrowing,” added Dr. Njoroge.
Among the recommendations made by the IMF is the lifting of Value Added Tax (VAT) exemptions on common user goods including bread, maize flour and cooking gas in a means to meet the prescribed revenue collection ceilings.
The CBK insists fiscal agents have all hands on the management deck even as questions emerge on the translation of desired fiscal consolidation which holds out for a narrower 6.3 per cent deficit by June as expenditure rises against revenue under-performance in the first half of the 2019/20 financial year.
“We wouldn’t tell the results of consolidation until June but would want to give it a succeeding chance. The needle is going in the right direction,” said the CBK Governor.
The show of resilience by the CBK comes even as the government continues to pursue a stand-by credit facility (SCF) from the IMF to caution against short-term balance of payment needs.
The CBK Governor remains confident of the capture of the pre-cautionary facility ahead of fresh talks at the end of the first quarter.
“We are more relaxed. I don’t get why everybody gets a sense that we should do this in a rush,” he said.
Kenya’s external balance remains solid with the current account deficit easing to 4.6 per cent from 5 per cent year on year in December 2019.
Further, foreign exchange reserves remain adequate at Ksh.855 billion ($8.5 billion) or an equivalent 5.2 months import cover supported in large part by strong export receipts and resilient remittances.
Moreover, the IMF facility being sort has remained in large part, a mere pre-caution with the government making nil drawings in the past four rounds with the last deployment of funds from one such program coming between January 2011 and December 2013.
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