The head of the International Monetary Fund (IMF) has warned Kenya against complacency despite the country’s positive growth in recent years which she described as “remarkable”.
Speaking to business leaders in Nairobi, IMF managing director Christine Lagarde said Kenya needs to improve its performance and continue implementing reforms even as it embarks on “very ambitious” and “difficult projects” like devolution and monetary integration with other East African Community members.
Lagarde lauded “the resilience of Kenya’s private sector” for its contribution to the country’s impressive turnaround alongside reforms in the economic, political and social landscape.
“Kenya’s economic gains over the last few years have been nothing short of remarkable. Coming on the heels of a delicate political transition, growth remains robust at more than 5% in 2013. It’s a number I have to tell you that many countries around the world would envy,” said Lagarde. “Great you may think; now is the time to commend Kenya for its great performance but [it is] not a time for complacency.”
Lagarde noted that Kenya has built a strong external position and is now in a favourable condition to tap international financial markets with a planned Eurobond issue.
However, she warned that as Kenya becomes more integrated in the global economy, it is bound to be exposed to external shocks through spillovers from trading partners’ economies or volatility in international financial markets.
Lagarde said Kenya should bolster its foreign reserve position and lower its debt to ensure the country is resilient to these shocks.
The IMF boss noted that Kenya’s Vision 2030, an ambitious development blueprint aimed at transforming the country into a middle-income economy, can be achieved if the right reforms are thought through and fiscal discipline is observed.
She outlined three major interventions needed for Kenya to become a middle-income economy by 2030: completing fiscal devolution, closing infrastructure gaps and continuing regional integration.
Lagarde said that while “devolution is a seducing concept”, implementing it is “the tricky thing”, adding that it is crucial that devolution is implemented successfully in Kenya to secure access to resources to all parts of the country.
As Kenya continues to attract foreign investment, Lagarde said, fixing infrastructure is crucial to promote foreign direct investment inflows.
“Kenya still has large infrastructure gaps that must be tackled if growth is to be raised and jobs created. The country’s newfound natural resource wealth is an opportunity to lift economic prospects, but these resources need to be exploited wisely and transparently,” said Lagarde. “Foreign investment should also be encouraged to help plug infrastructure needs.”
Lagarde said her first trip to Kenya as managing director of the IMF was important in demonstrating that the IMF is not just an “esoteric institution headquartered in Washington” but a partner in good and bad times.
“The IMF has been a partner through thick and thin,” said Lagarde. “We were by the side of Kenya in 2009 when the crisis hit. We were by the side of Kenya in 2011 when the drought affected you and we were by the side of Kenya at the time of the very unfortunate Westgate tragedy.”