Kenya monetary policy ‘appropriate’: IMF


The International Monetary Fund said yesterday rate cuts in Kenya were “appropriate” and future monetary policy should focus on safeguarding price stability as the economic recovery gathers steam.

In its annual health-check of the Kenyan economy, the IMF said “available instruments should be employed decisively to achieve this objective.”

Kenya’s central bank cut the benchmark rate by 75 basis points to 7% in November is the biggest single cut for years. Central bank Governor Njuguna Ndung’u said the motivation for cutting rates was the low risk of inflation acceleration as the recovery strengthens.

The IMF said Kenya’s exchange rate “seems broadly in line with economic fundamentals.” It also said it supported the authorities plans to limit foreign exchange interventions to smooth excessive short-term volatility and to meet foreign reserve targets.

The IMF said economic growth in 2009/10 was now projected at 3.2%, up from 2.2 % in 2008/09, despite the effects of a long drought. The Fund said growth in 2010/11 is likely to be 4.6%.