INTERNATIONAL – Kenya is in no rush to secure a new standby credit facility with the International Monetary Fund as its economy continues to show strength, central bank governor Patrick Njoroge said on Thursday.
The previous $989.8 million arrangement expired in September after the government failed to meet the IMF’s conditions for an extension, including the repeal of a cap on commercial lending.
Njoroge told reporters Kenya was talking the IMF about a new standby facility, but was not desperate for a deal.
“It’s not that we are on the ropes, (that) the economy is on the ropes and we need the IMF to come and sort us out,” he added.
Njoroge offered no timeline for when an agreement might be reached but said conversations would continue during the IMF’s Spring meetings in April.
The government is preparing to issue a $2.5 billion Eurobond and analysts have said it could secure a better interest rate if the standby arrangement with the IMF was in place.
But Njoroge said the two things were different.
“Some of us are so fixated about these two, that they are aligned, that’s maybe why we at times feel that we are under pressure... We will do it when we need to,” he said.
“There is no rush.”
He was speaking a day after the central bank kept its benchmark lending rate at 9.0 percent, saying inflation expectations remain within the target range.
Njoroge said the Kenyan economy was still on course for 6.3 percent economic growth this year, driven by agriculture, services and a further recovery in industry, even though the external outlook is weakening.
The central bank estimates 2018 growth at 6.1 percent.
China’s slowdown and trade dispute with the United States, and continued uncertainty over Britain’s exit from the European Union, are all dragging on the global economy.
While Kenya will see a continuation of existing trade arrangements with Britain, Brexit may affect foreign direct investment into the UK.
“So which way forward, well, go figure,” Njoroge said on Brexit. “Those external elements will continue to push down the expectations and outcomes in the global economy and that obviously has implications for us.”
On Wednesday, the central bank restated its view that the cap on commercial lending rates — set at 4 percentage points above the benchmark by lawmakers in late 2016 — constrains its ability to conduct monetary policy effectively.
A Kenyan court ruled in March that the cap was unconstitutional, but judges suspended the decision for 12 months to allow parliament to re-examine the law.
Private sector credit grew by 3.4 percent in the 12 months to February, compared to 3.0 percent in January, the central bank said on Wednesday.
It forecast the current account deficit would narrow to 4.8 percent of GDP in 2019 from an estimated 4.9 percent in 2018.
“We expect our current account deficit to remain around 5 percent in the medium term,” Njoroge said.Reuters