NAIROBI: The International Monetary Fund has lauded Kenya’s Central Bank for bringing stability in the local financial market. The fund says the move to tighten the interest rates has saved the economy from further shocks that risked dragging economic growth.
However, the fund has urged the government to boost export and address challenges facing the tourism industry which is Kenya’s third highest foreign exchange exchange earner.
Just like many global financial markets, the Kenyan market has been rocked by major instability that has seen the local currency weaken and which is threatening to starve the market off the much needed dollars. The volatility has been occasioned by the strengthening American dollar due to improved economic prospects in the US.
To bring stability in the market, the central bank has been active in the market selling dollars and has raised the benchmark rate by 300 basis points to 11.5 percent. This has managed to calm the storm in the market earning praise from global top lender.
IMF Resident Representative Armando Morales however reckons that the move is a temporary measure and Kenya should effect long term measures to boost her export base and improve earnings from tourism which is one of the country’s top forex earners.
IMF says that fiscal adjustment in many countries in the region could lead to a buildup of government arrears to suppliers resulting in liquidity problems for many commercial banks.
Trademark East Africa Chief Executive Chris Kiptoo has also raised fears that high interest rates are clawing back on investment in the country. The IMF report says that oil based economies in the Sub Saharan Africa are likely to face major disruptions this year as oil prices stay depressed.
