By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) Monday said Kenya is the second largest investor in sub-Saharan Africa.
Christine Lagarde, the Managing Director (MD) of the Fund made this disclosure in her speech ‘’Kenya at the Economic Frontier: Challenges and Opportunities’’ at the Kenya Private Sector Alliance Forum in Nairobi.
‘’Kenya has indeed come a long way over the past few years. The key is now to build on this momentum, with emphasis in the following areas. We might call them the “Three C’s”: completing fiscal devolution; closing infrastructure gaps; and continuing regional integration,’’ she said.
According to Lagarde, in Sub-Saharan Africa, Kenya has led the way in the process of regional integration and to reach the status of an emerging market economy, it has to implement the “Three C’s”.
One of the emphasis areas according to Lagarde is that regional integration has opened up new markets, supported the emergence of a middle class, and enabled domestic demand to become an engine of growth in Kenya.
She further affirmed that the process of regional integration must now be deepened. ‘’In that context, the heads of states of the East African Community recently agreed on a roadmap toward a monetary union. This is an opportunity but also a major challenge. It will be important to draw upon the experience and lessons learned from other regions, and to manage the process carefully. The IMF stands ready to provide technical assistance and advice, as needed,’’ Lagarde said.
Another area of emphasis for Kenya in becoming an emerging market economy is on fiscal devolution, ‘’the process will be complex and the risks are significant,’’ the IMF Chief said.
She said it’s crucial that devolution is implemented successfully: crucial to secure access to resources to all parts of the country; and crucial to ensure that every region gets to benefit from improved economic conditions.
‘’If done properly, this kind of devolution can bolster social cohesion, by increasing accountability in the management of public resources, and improving the quality of services delivery. It can also create new private sector opportunities in the new counties,’’ Lagarde said.
On the risk factor, she said it is imperative that devolution is done right by spending needs to remain within the available envelope of public resources—and be transparent.
According to Lagarde, the third priority area for Kenya in reaching emerging market status is closing infrastructure gaps, ‘’Kenya still has large infrastructure gaps that must be tackled, if growth is to be raised and jobs created. The country’s newfound natural resource wealth is an opportunity to lift economic prospects, but these resources need to be exploited wisely and transparently,’’ she affirmed.
The IMF MD said Kenya is currently building a fiscal and regulatory regime to govern the use of revenues from natural resources development. ‘’This should provide a transparent framework for investors and a stable base for government revenue,’’ she said.
She also said foreign investment should also be encouraged to help plug infrastructure needs. ‘’I understand that foreign investors are interested in financing major projects, such as the construction of a modern railway line from the coastal area of Kenya to neighbouring countries, and the expansion of geothermal power generation. Again, these types of financing should be encouraged, provided that they remain consistent with a sustainable debt position,’’ Lagarde said.
