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IMF says Kenya makes progress but more needed

NAIROBI: The IMF said on Tuesday that Kenya has taken encouraging steps to tackle corruption and tighten fiscal policy but also made clear that more are needed before it resumes lending to the country.

A high-level International Monetary Fund team wrapped up a two-week visit to Kenya on Tuesday morning by giving a brief review of the recent reforms and the challenges ahead.

"It was encouraging to note the expressed determination of the authorities to face Kenya's continued challenges. At the same time, all recognised that much remains to be done," the team said in a statement.

The IMF suspended lending to Kenya in mid-1997 in protest at widespread corruption but recently agreed to open negotiations on a possible new loan after the government took a series of measures to combat corruption and clean up its finances.

Those negotiations opened two weeks ago and Kenyan officials appear to have persuaded the Fund they are serious about reform.

"In the discussions, the IMF team welcomed the recent steps taken to improve governance," the Fund said on Tuesday, before adding the now familiar caveat that there was still work to do.

"The Kenyan authorities acknowledged that much remains to be done, and that it is important to move forward forcefully, comprehensively, and convincingly."

Kenya's currency market has in the past been highly sensitive to IMF comments but showed virtually no reaction on Tuesday with analysts saying the IMF was simply restating its position that Kenya has made progress and must keep doing so.

The IMF said Kenya's fiscal position is "complicated" because of lower-than-expected revenues but that government finances have been managed well enough to maintain stability in the financial markets.

POVERTY PLAN KEY TO NEW LOAN

The IMF experts worked closely with a separate team from the World Bank in reviewing Kenya's fiscal developments, steps taken to tackle corruption, and government efforts to draw up a programme for economic growth and reducing poverty.

That programme would serve as the basis for any new lending under the IMF's so-called Poverty Reduction and Growth Facility.

The IMF said Kenya's programme would detail its planned expenditures, measures to improve "governance" -- the IMF's term for clean government -- and key structural reforms.

It said the "Poverty Reduction Strategy Paper" should be produced within the next 1-2 years and urged the government to carry out extensive consultations with civic groups, parliament, the donor community and aid organisations.

The IMF said it would return to Kenya in the near future but said nothing about when a new loan facility might be extended.

Kenya's government hopes a loan can be agreed by mid-year to help resuscitate an economy that has slowed from growth of 4.6 percent in 1996 to about 1.4 percent last year.

President Daniel arap Moi met with the IMF team on Monday and his office said he asked them to speed up the negotiations "so that the economy could grow at a faster rate to reduce poverty and unemployment."

Kenyan officials insist they are committed to reform.

Over the past six months, a reform "dream team" has replaced the heads of several parastatals, taken steps to make the tender of state sector contracts more transparent and is drawing up plans to cut the number of public employees by about 30 percent.-Reuters