NAIROBI, Kenya – The International Monetary Fund (IMF) has expressed concern over Kenya’s exchange rate policy, suggesting that the shilling’s unusually steady performance against the US dollar may be distorting key aspects of monetary policy.
Kenya Revenue Authority (KRA) Chairman Ndiritu Muriithi revealed that the Fund had raised the issue during its recent mission to Nairobi, noting that the local currency’s limited fluctuation was affecting monetary policy transmission and inflation targeting.
“One of the things the IMF told us when they were in town two weeks ago is that the exchange rate is too stable. They think it is interfering with the transmission and inflation targeting,” Muriithi said during the release of the Total Tax Contribution of the Kenya Banking Sector 2024 Report on Friday.
The IMF mission, which ran from September 25 to October 9, marked the start of discussions on a new financial arrangement after Kenya’s previous $3.6 billion, four-year programme ended prematurely in March. That facility had begun in April 2021 and was due to conclude in April 2025.
In a post-mission statement, the IMF said talks centred on a potential reform package aimed at enhancing fiscal credibility, ensuring debt sustainability, and reducing fiscal and external sector risks.
The Fund also stressed the importance of improving governance, transparency, and efficiency within public institutions.
Further consultations between IMF officials and the National Treasury were scheduled on the sidelines of the IMF Annual Meetings from October 13 to 18.
Despite the caution from the Fund, Treasury Cabinet Secretary John Mbadi has maintained an optimistic outlook, saying negotiations have shown “encouraging progress” toward a new programme that would support Kenya’s fiscal reforms.
The IMF’s latest assessment and upcoming policy update are expected to be closely monitored by investors, given the implications for Kenya’s foreign exchange stability, sovereign borrowing costs, and overall economic outlook.
