Kenya's economy, international debt within acceptable levels, says IMF

IMF Country representative Armando Morales addressing the press after International Monetary Fund meeting in Nairobi PHOTO: BEVERLYNE MUSILI/STANDARD

NAIROBI: Kenya's economy is not all doom and gloom, after all. According to the International Monetary Fund (IMF), the country's growth prospects and debt/gross domestic product (GDP) ratio are within acceptable levels.

IMF further asserts that Kenya's current and projected growth prospects are better than those of her peers in the sub-Saharan African region.

The Bretton Woods institution has tipped sub-Saharan Africa's economy to expand at 4.5 per cent in 2015. The institution has since downgraded Kenya's GDP growth for 2015 from 6.9 per cent to 6.5 per cent.

Speaking during the launch of the Regional Economic Outlook for sub-Saharan Africa, Kenya's IMF Resident Representative Armando Morales, downplayed fears that the country's debt-to-GDP ratio was spiraling out of control.

"Debt in Kenya is classified by the IMF as low-distress risk. And to move to distress, you have to move through two other categories - moderate risk and high risk, and Kenya is below that. So it is very unlikely that the country will face a situation of distress in the coming years," said Mr Morales.

no alarming bells

He added the country's deficit is not alarming. He said:  "As long as the deficits for this year and the coming fiscal years remain projected at the same levels, then it is sustainable."

He revealed that IMF has a programme in place to review the country's progress on maintenance of deficit.

Morales' position was supported by Chris Kiptoo of Trademark East Africa who asked the Government to find a way to counter the prevailing negative perceptions on the country's macro-economic stability.

Kenya's credit outlook has since seen it enter into the bad books of such global credit rating agencies as Standard and Poor's (S&P) and Fitch Ratings. However, Morales insisted that these agencies have downgraded Kenya's economic outlook and not her rating.

"Rating agencies have been downgrading the outlook for Kenya but not the rate, meaning that they still believe, as we do, that it is sustainable," he said.

However, Nikhil Hira of Deloitte and Touche insisted that things are not that rosy.  

Mr Hira said being a mid-income country, it was worrying that there are huge wealth disparities between the poor and the rich; that the huge infrastructure spending, though good in the long-term, was eating into the country's cash reserve in the short-term.

Hira said although the country's position in the World Bank's ease of doing business report had improved, it was still difficult to start a business.

IMF and World Bank have occasionally come under attack for being economic with the truth. Although they have downgraded Kenya's growth projections for 2016 and said the economy is facing some headwinds, they nevertheless insist the country's growth is solid.