The International Monetary Fund said Kenya’s economy may expand 5.5 percent to 6 percent this year, exceeding the government’s forecast, as long as peaceful elections show stability for investors.
“If the election takes place orderly without major violence, I would expect investment to pick-up significantly,” Domenico Fanizza, the IMF’s mission chief for Kenya, told reporters today in the capital, Nairobi.
Kenya will on March 4 hold its first election since a disputed December 2007 vote sparked ethnic clashes that left more than 1,100 people dead and cut growth to 1.5 percent in 2008 from 7 percent a year earlier. The economy expanded 4.5 percent to 5 percent in 2012, according to the IMF.
The two presidential frontrunners in the campaign are Prime Minister Raila Odinga, representing the Coalition for Reform and Democracy alliance, and Deputy Premier Uhuru Kenyatta with the Jubilee coalition. Kenyatta, alongside his vice-presidential running mate William Ruto, are due in April to face trials at the International Criminal Court on crimes against humanity charges for directing post-election violence. The men, along with two other Kenyan suspects, deny the charges.
Fanizza said it’s too early to predict measures that foreign governments would take toward a presidency led by an ICC suspect, or how that would affect Kenya’s economy.
The U.K. said it makes only essential contact with people facing ICC indictments, while U.S. Assistant Secretary of State for African Affairs Johnnie Carson told Kenyan voters on Feb. 7 that “choices have consequences.”
Kenya’s economic resilience during the global financial crisis shows growth is increasingly led by its rising middle class of consumers, as well as technology and banking, making it less reliant on traditional export markets, Fanizza said. Kenya is the world’s largest exporter of black tea and it supplies a third of all flowers traded in Europe.
“Kenya has become much less dependent on economic relations with Europe,” he said. “Growth has mainly been domestically driven.” Kenya’s government expects the economy to expand “slightly above” 5 percent this year.
The IMF “welcomes” the central bank’s interest rate easing cycle, according to a statement handed to reporters today.
The Monetary Policy Committee cut its benchmark interest rate four times since July to 9.5 percent after inflation slowed, allowing the central bank to shift the focus to boosting the economy. “Monetary operations should seek to manage liquidity effectively, leading interbank rates to further converge to the central bank policy rate,” according to the statement.
The average rate banks charge each other on the lending markets was 9.72 percent yesterday, according to the latest data on the central bank’s website.
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