- Kenya facing weakening currency, widening budget deficit
- IMF forecasting 6.5% economic expansion for Kenya this year
The International Monetary Fund’s forecasts for the Kenyan economy are too optimistic for a nation struggling to cope with a weakening currency and rising interest rates, according to a senior official of the main bankers’ lobby group.
The IMF’s assessment “has left many questions in its wake given the increasingly difficult environment that East Africa’s largest economy has lately faced,” Jared Osoro, director of research and financial markets and policy at the Kenya Bankers Association, wrote in an opinion piece in the Business Daily newspaper on Wednesday.
The Washington-based IMF is projecting economic growth of 6.5 percent this year for Kenya, faster than the 5.3 percent achieved in 2014. At the same time, the nation is faced with a widening budget deficit and a currency that’s weakened 13 percent against the dollar in 2015. The central bank has raised its benchmark rate by 300 basis points to 11.5 percent this year to bolster the currency and curb inflation expectations.
Osoro said economic output would have to increase by 8 percent in each of the two final quarters of this year for the $55 billion economy to realize the IMF’s growth projection. Gross domestic product rose 4.9 percent in the first quarter from a year ago, and 5.5 percent in the second quarter.
“The question is, how realistic is such expectation?” he said. “Very unrealistic, in my judgment.”
Tourism, the nation’s second-largest source of foreign-exchange income after agriculture, is struggling to remain afloat following a global slowdown and a series of deadly attacks by Somali militants.
In its first review of Kenya’s standby loan program in September, the IMF said the economy’s performance had remained satisfactory despite risks coming from volatile financial markets and insecurity.
“Growth hasn’t really suffered that much from what we can see except for tourism,” Armando Morales, the IMF’s country representative in Kenya, said in a Sept. 10 interview.