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The recently concluded IMF-World Bank Annual Meetings provided Kenya with an invaluable platform to learn from the experience of peers and to showcase its resilience, recovery, and readiness for sustained economic growth.
In discussions with global financial leaders, Kenya not only shared its economic journey but also demonstrated the strong fundamentals underpinning the resilience of its economy.
The country’s strategic reforms under the Bottom-Up Economic Transformation Agenda (Beta) reveal a well-crafted economic development path anchored in data-driven strategies and a commitment to balanced, sustainable economic development.
Like many economies worldwide, Kenya has faced substantial challenges, including rising prices, currency pressures, and increasing public debt.
Yet the government has responded with targeted reforms across key sectors such as agriculture, micro, small, and medium enterprises (MSMEs), housing, healthcare, and the digital economy.
These initiatives are already yielding positive outcomes: in 2023, the economy grew by 5.6 percent, up from 4.9 percent in 2022 and surpassing the pre-pandemic growth rate of 4.7 percent.
Looking ahead, Kenya projects a growth rate of 5.2 percent in 2024 and 5.4 percent in 2025, marking a forward-looking investment in the nation’s future rather than a mere rebound.
One significant achievement for the country is the successful issuance of a Eurobond in February 2024 and simultaneous buy back of $1.5 billion of the $2 billion Eurobond that was to mature in June 2024.
Along with the substantial financial assistance from the International Monetary Fund (IMF) and the World Bank, the move alleviated the near-term external liquidity and refinancing risks facing the country. The positive market confidence supported private external inflows into the local bond market.
Against this backdrop, and supported by a tight monetary policy stance, the shilling has strengthened markedly this year. As a result, inflation has declined from 9.6 percent in October 2022, 6.8 percent in September 2023 to 2.7 percent in October 2024.
This outcome reflects a careful calibration of the Central Bank Rate (CBR) to balance economic growth with inflation control, highlighting the government’s proactive, balanced approach to macro-economic stability.
Additionally, Kenya’s foreign exchange reserves have increased by $2.4 billion to stand at $7.97 billion (about 4.4 months of import cover), thus giving the economy a robust buffer against external shocks. Remittances from Kenyans abroad have risen by 17 percent, remaining a key source of our foreign exchange earnings.
Kenya’s approach integrates strong economic principles with growth enabling priorities, such as innovation, skills development, and policies that address real-world economic needs.
Investments in digital infrastructure and education, help Kenyans keep pace with a rapidly evolving global economy, while prioritising MSMEs and local economies ensures that national policies translate into meaningful, positive changes for millions, fostering an economy that serves all Kenyans.
Kenya’s fiscal reforms, implemented in close partnership with the IMF and the world Bank among other development partners, aim to create stability both in the short and long term. This disciplined approach has strengthened confidence among domestic and international stakeholders alike.
Kenya acknowledges the challenges that lie ahead. For example, the rejection of the Finance Bill 2024, required a temporary adjustment in the fiscal framework, projecting revenue at 16.9 percent of GDP and expenditures at 21.5 percent, with a fiscal deficit of 4.3 percent.
These adjustments are part of a broader strategy to reduce the deficit to below 3.0 percent over the medium term, underscoring Kenya’s commitment to fiscal discipline.
Improving revenue collection remains a high priority, and the Kenya Revenue Authority (KRA) is actively implementing automation and other compliance boosting measures intended to spur revenue collection without overburdening businesses.
Kenya is also advancing public-private partnerships (PPPs) to leverage private sector efficiency and financing, for continued infrastructure development without accumulating excessive debt.
The international community has recognised and backed Kenya’s economic strategy. The IMF and the World Bank, along with other partners, have provided both technical and financial support, signalling a high level of trust in Kenya’s disciplined, data-driven reforms.
This support from global partners validates Kenya’s approach as one that can withstand scrutiny and achieve tangible outcomes. Equally essential is the government’s commitment to keeping citizens and stakeholders informed.
Transparency and effective communication about economic progress and challenges foster trust and engagement, ensuring that all Kenyans feel included in the national journey. When citizens understand and engage with the government’s economic vision, the collective effort to address shared challenges becomes more effective and meaningful, maximising benefits for everyone.
Kenya’s economic path is a blend of ambition and responsibility, facing today’s challenges while building a solid foundation for tomorrow.
With sound policies, strong partnerships, and an unwavering commitment to growth, Kenya is not only prepared to endure but also to thrive, aiming to create a prosperous future for all its citizens.
The IMF’s recent approval of the combined seventh and eighth reviews of Kenya’s Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programme underscores this progress. In addition, the IMF Executive Board also approved the second review of the Resilience and Sustainability Facility (RSF) programme.
This approval acknowledges Kenya’s prudent economic policies and the significant strides made in implementing critical reform measures and commitments under these programmes.
The IMF’s endorsement has triggered an immediate disbursement of $485.8 million under the EFF/ECF and an additional $120.3 million under the RSF, totalling $606.1 million.
This funding represents a strategic recalibration of Kenya’s financing needs, as the country opted out of exceptional financing previously approved by the board in January 2024 following the successful settlement of the maturing Eurobond in June 2024.
These resources will reinforce Kenya’s macroeconomic stability and enhance its resilience against external shocks by bolstering foreign reserves, providing essential budget support, and strengthening climate resilience efforts.
Dr Kiptoo is Principal Secretary of the National Treasury
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