Kenya gets positive IMF rating despite huge public debt

By WINSLEY MASESE

Kenya’s public debts are still within manageable levels, a top International Monetary Fund (IMF) official has said. The optimism sends a clear signal of the country’s ability to attract investors despite public debt hitting nearly two trillion.

 However, IMF director of African Development Antoinette Sayeh, urged the government to channel borrowed funds towards development expenditure, as opposed to recurrent expenditure.

 “Upon evaluating Kenya’s debt sustainability, the recent analysis does not point to any deterioration of the debt stress situation,” she said in Nairobi on Monday when meeting the press during her visit.

She said the State ought to manage borrowed funds prudently and finance high return investments. Treasury said Kenya’s total public debt rose 16 per cent to Sh1.89 trillion in the fiscal year to June.

Yield requirement

The public debt hit 51.7 per cent of national output in the year to June, up from 44.5 per cent the previous year. This has raised questions about the likely yield required for future external borrowing.

The figure is likely to increase following the recent borrowing of Sh425 billion from China when President Uhuru visited the Asian country last month. Sayeh also gave a positive outlook for the economy, citing the increased investment in the stock market through foreign direct investments. This, she said is a positive indication on the growing investor confidence in the economy.

 “Increased direct foreign investment in the stock market is an indication of the increasing confidence in the Kenyan economy as investors are encouraged to invest with high growth prospects,” she noted.

Besides, our record on macroeconomic policy reforms and devolution restructuring has been positive. “These achievements are the result of reforms that Kenya has implemented in recent years, supported by strong macroeconomic policies,” she noted. Touch fiscal policies have reduced vulnerabilities by taming high inflationary pressures, increasing international reserves and lowering the current account deficit among others.  “Investors and others know Kenya, relative to other countries as a good place to do business, especially by creating an enabling environment for the private sector to do business,” she said.

Telecom reforms

 Kenya has also performed well in the mobile money transfer as well as agent banking, with Safaricom’s M-Pesa becoming a global success story as well as a model for emerging economies. Kenya’s growth prospects were boosted after recent discoveries of oil and water in Turkana.  In August, Central Bank of Kenya held its main lending rate at 8.5 per cent. Sayeh is on a two-day visit to meet top State officials and other policy makers. She is scheduled to meet the President.

During her stay, she will review the progress the economy has made and to assess what the country needs to do as it moves to the next stage of development. The conference, ‘Ready for Take Off’ will bring together the public and private sectors, civil society, and academia to reflect on the success so far.

She promised that IMF will aid in shoring up Kenya’s foreign reserves. In the last three years, IMF has injected over Sh595 billion ($7 billion) into the Kenyan economy.