- Governor Patrick Njoroge has written to Janet Yellen seeking audience with her during this year’s Spring Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF).
- The meetings are set to take place in Washington DC from April 10 –16.
- In January, the World Bank revised downwards Kenya’s growth projection for 2023 to five per cent from 5.2 per cent.
The Central Bank of Kenya (CBK) governor is keen to meet the US Secretary of the Treasury, as the East African country navigates through tough economic times occasioned by both global and domestic factors.
Governor Patrick Njoroge has written to Janet Yellen seeking audience with her during this year’s Spring Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF), set to take place in Washington DC from April 10 –16.
This is after failing to meet Yellen last October.
“I would greatly appreciate meeting you on the margins of the Spring Meetings, during April 10-16, 2023. Our respective offices could liaise and confirm the timing of the meeting. Please accept assurance of my highest consideration,” a letter from Njoroge’s office reads.
In the letter dated March 28, seen by The Exchange Africa, the CBK governor indicated efforts to meet last October were not successful.
“Unfortunately we could not meet at the IMF/World Bank Annual Meeting last October, despite our best efforts,” referring to his letter of October 6, 2022.
Since then, Njoroge notes that additional shocks have buffeted the global economy, narrowing further the path for emerging markets and developing countries (EMDCs).
This depicts the tough economic times the country, among other economies are going through.
The Annual and Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group each year brings together central bankers, ministers of finance and development, private sector executives, civil society representatives, and academics to discuss the state of the global economy and issues of international concern.
They include growth outlook, economic development, financial stability, poverty reduction and aid effectiveness, which help drive policy interventions and solutions.
Kenya’s case
GDP in Kenya is expected to reach $117.19 billion by the end of 2023, according to Trading Economics global macro models and analysts expectations.
In the long-term, it is projected to trend around $124.69 billion in 2024 and $131.92 billion in 2025.
However, the East Africa economic powerhouse is navigating some of the toughest economic times.
These include high inflation, rising debt, a weakening shilling, falling forex reserves, slowdown in economic growth and political uncertainty that could further dampen the economy.
This Covid-19 pandemic effects, which are yet to be shaken off, the Russia-Ukraine war, global macroeconomics and the fears of a global recessions remain a threat to not only Kenya, but economies across the world.
In January, the World Bank revised downwards Kenya’s growth projection for 2023 to five per cent from 5.2 per cent. It is expected to pick to 5.3 per cent next year even as the country lags behind its East African peers of Tanzania and Uganda, which have stronger forecasts.
Tanzania’s economy is expected to grow by 5.3 per cent this year and 6.1 per cent next year. While Uganda has a similar projection with Kenya, of five per cent this year, it has a stronger forecast of 6.1 per cent in 2024.
Kenya is struggling with a weakening local currency (Kenya Shilling) which has recorded a month-on-month fall since last year, to the average of 135.52 units to a dollar recorded this week.
Its average rate for March 2022 was around 113.59, meaning it has lost up to 19.3 per cent to the dollar to date.
“We expect the shilling to continue weakening towards month-end as importers close transactions, with support from central bank FX reserves dwindling, sufficient for only 3.66 months of import cover,” notes Terry Karanja, Senior Treasury Associate, AZA Finance.
The country’s forex reserves have been on a downward trend, dipping for the seventh time in a row since it breached the statutory requirement in January.
CBK data shows usable foreign exchange reserves stood USD 6.55 billion as of March 23, which is only 3.66 months of import cover.
Read: Kenya’s economy to grow by 5% in 2023 amid rise in commodity prices
While the CBK says the reserves meets its statutory requirement, to endeavor to maintain at least four months of import cover, they are below the threshold and could fall further.
The depletion has mainly been as a result of dollar-denominated loan repayments, low earnings as a result of reduced exports, low diaspora remittances and a high import bill mainly on fuel and fertilizer.
Kenya is staring at the maturing Eurobond and SGR debt maturity where it is expected to repay an estimated $506.7 million.
The country’s total debt stock was at $69.91 billion (Ksh9.145 trillion) in December, and is estimated to have grown further due to additional credit facilities to bridge budget deficits.
Total external debt is above $35.7 billion. Inflation was recorded at 9.2 per cent in February.
CBK has been keen to address the shocks with a number of initiatives in place among them being increasing the base lending rate, which was retained at 8.75 per cent during its latest Monetary Policy Committee meeting at the end of January.
“The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures, as necessary. The Committee will meet again in March 2023, but remains ready to re-convene earlier if necessary,” Njoroge had said.
The Committee noted that the impact of the further tightening of monetary policy in November 2022 to anchor inflationary pressures was still transmitting in the economy.
Yellen’s recent tour of Africa
The Spring Meetings come about two months since Yellen’s visit to Africa, in late January, where she held meetings in Zambia, Senegal and South Africa, between January 17-28.
While in Africa, Secretary Yellen highlighted the Biden-Harris Administration’s work to deepen U.S – Africa economic ties, including by expanding trade and investment flows and promoting sustainable and inclusive economic growth.
Kenya is currently pursuing a trade deal with the US ahead of the expiry of AGOA in 2025.
Her visit came after the U.S–Africa Leaders Summit held in December in Washington, DC, where President Biden announced over $15 billion in two-way trade and investment commitments, deals, and partnerships.
Secretary Yellen discussed ways that the United States is working with African leaders to build a stronger and more resilient economy on the continent that benefits their citizens, the U.S, and the entire world.
This includes by funding high quality infrastructure investments through the Partnership for Global Infrastructure Investment, preventing and preparing for future pandemics through the new Pandemic Fund, partnering to strengthen democracies and institutions against corruption, and helping African countries address debt vulnerabilities.
Kenya is currently pursuing a trade pact with the US ahead of the expiry of AGOA in 2025.
The two countries last month held a week-long meetings on the US-Kenya Strategic Trade and Investment Partnership (STIP).
During the meetings, the two sides exchanged views on the key concepts to be addressed on almost all of the areas outlined in the July 14, 2022 joint statement announcing the initiative.
The goal of the Partnership is to increase investment; promote sustainable and inclusive economic growth; benefit workers, consumers, and businesses (including micro-small and medium-sized enterprise s(MSMEs); and support African regional economic integration.
The U.S delegation was led by Assistant United States Trade Representative for Africa Connie Hamilton.
The Kenyan delegation was led by Trade Principal Secretary Alfred K’Ombudo. The U.S. delegation also included representatives from over 20 U.S. government agencies.
Going into the Springs Meetings
In his speech, “Rethinking Development Policy in a Time of Crisis” President Malpass will discuss the challenges facing development policy including the need for macroeconomic stability, the importance of private capital to international integration, and the increasing need to support global public goods.
“President Malpass will emphasize the role of education in supporting growth and creating pathways out of fragility and extremism, which are both critical for Africa’s Sahel Region,” a communiqué shared on Tuesday indicated.
The meetings come at the back of a recent turbulence in the banking sector, where major stocks have also tumbled on the fall of several institutions.
As the leaders head to the meetings, the current global economic factors are expected to remain a key focus area, even as individual central bankers, among them Njoroge, seek solutions for their respective economies.
