The International Monetary Fund (IMF) has given its stamp of approval on progress made by Kenya in implementing a devolved system of government. This comes after an IMF mission led by Mr. Mauro Mecagni visited Nairobi from June 25 to July 9 to conduct the 2014 Article IV Consultation discussions1. The mission met with Hon. Henry Rotich, Cabinet Secretary of the National Treasury, Professor Njuguna Ndungu, Governor of the Central Bank of Kenya, the Speakers of the Senate and the National Assembly, senior government officials, and representatives of civil society, the private sector and development partners. The mission team wishes to thank the authorities for their warm hospitality, the excellent collaboration, and the high quality discussions.
“Devolution is a major undertaking that holds great promise for the Kenyans . It provides the opportunity to foster inclusive growth, increase job creation and address inequality. While considerable progress has been made during the first year of devolution, accountability, compliance with the legal framework and implementation capacity need to be further strengthened,†said the IMF.
“Despite good revenue performance, the 2013/14 Central government deficit remained unchanged in percent of GDP on account of higher wages, security spending and larger transfers to counties, said the IMF statement.
The fund notes that strengthening capacity-building in public financial management is key to ensure that the high expectations linked to devolution are met. The Inter-governmental Fiscal Relations Department, as envisaged under Kenya’s devolved system of government has yet to be operationalised.
Also pending is implementation of the Treasury Single Account, the adoption of the Public Financial Management Act regulations and a formal agreement between the central government and counties on outstanding liabilities, as well as stronger oversight on the use of public resources.
The IMF team also pointed out that controlling the wage bill at both national and county level and improving the quality and efficiency of public spending will be essential to create fiscal space required to execute other programmes and projects.
“Investing in irrigation, energy, and transport infrastructure remains a priority to improve competitiveness and unlock the country’s growth potential. Continued efforts to mobilise domestic revenue are also required to fund these priorities,†said the IMF statement.
On its return to Washington, the IMF team will prepare a staff report that is tentatively scheduled for discussion by the IMF Executive Board in late September. The completion of the Article IV Consultation is subject to the discussion by the IMF Executive Board.