By Vivienne Russell | 3 October 2013

Economic reform in Kenya has ‘paid off’, but future fiscal policy needs to focus on increasing the efficiency and quality of public spending, the International Monetary Fund has said.

In its sixth and final review under the three-year Extended Credit Facility approved in January 2011, the IMF praised Kenya’s spending control and its improved public financial management.

‘Kenya’s economic reforms over the last three year have paid off,’ Domenico Fanizza, who led the IMF mission, said.

‘Budgetary discipline had helped ensure fiscal and external sustainability, while still providing sufficient resources to implement the new constitution and start fiscal devolution.’

He noted there had been progress of structural reform, particularly the strengthened regulatory environment for public financial management at both national and county level.

The recently enacted Value Added Tax law should increase administrative efficiency, bolster revenue collection and bring in resources for social and development programme.

‘These reforms have set the stage for stronger, more inclusive and lasting economic growth, but challenges persist,’ said Fanizza.

‘Efforts to anchor economic stability through sound fiscal and monetary policies and market-oriented reforms should redouble to build upon the foundations of success.’

The IMF said Kenya’s ‘scarce public resources’ needed to be used well by containing pressures on the public sector wages and implementing regulations from the Public Financial Management Act.

‘The ongoing fiscal decentralisation provides and opportunity to improve accountability and the quality of service delivery, but its success will depend on building capacity at the county level,’ the IMF said.

The fund’s executive board will consider this latest review at a meeting in November. Should they approve, around $110m will be disbursed to Kenya under the terms of the 2011 loan agreement. Total disbursements under the arrangement amount to $750m.