Kenya: Staff Report for the 2018 Article IV Consultation and Establishment of Performance Criteria for the Second Review Under the Stand-by Arrangement

Abstract

Kenya has maintained strong growth in recent years and external imbalances have narrowed, strengthening resilience to shocks. The business environment continues to improve, supporting private investment. However, a severe drought, an extended presidential election, and weak bank lending-due in part to interest rate controls-slowed growth in 2017. In addition, public debt has risen as revenue shortfalls have not been matched by spending cuts. Moreover, interest rate controls continue to hamper lending (especially to small-and medium-size enterprises), growth, and monetary policy.