NAIROBI (Reuters) - Annual growth rates in Kenya are probably about one percentage point more than official statistics show, a senior Treasury official said on Friday, adding that the ministry favoured a “gradual” easing of monetary policy.
Kenya’s central bank has cut 500 basis points off its main interest rate since July and analysts are divided over how fast it will move in a bid to bolster growth further after upping rates to 18 percent last year to counter surging inflation.
The bank is independent but operates under broad targets set by the finance ministry, or Treasury, which also has a non-voting member who sits in at meetings of its rate-setting panel.
Geoffrey Mwau, who as the ministry’s second most senior civil servant has served as its non-voting representative, told Reuters inflation was “where we (the Treasury) want it to be” after falling to just over 4 percent last month.
“Rains have been good and that is reflected in inflation consistently coming down. The shilling has stabilised. Our reserves are above four months imports equivalent. Our debt is manageable,” he said in an interview on Friday.
“This year we expect 5 percent plus (growth).”
He said that growth in credit to the private sector has come dowm from a peak of 30 percent last year to close to official targets, without providing actual figures.
“It is a clear indication that the policies have worked and it is also an indication that you cannot turn around and say ‘let us expand credit’ you have to be gradual,” he said.
Although east Africa’s biggest economy has posted healthy growth rates, it has lagged others like Tanzania and Rwanda. Mwau said the government was sticking with a forecast of just over 5 percent growth this year and next after last year’s 4.3 percent expansion.
But he said that officials were also looking at ways of improving methodology - something that, in consultation with the IMF, had a big impact on inflation numbers three years ago.
“That (2011) growth is in a sense underestimated,” Mwau said. “There is no way you can have the kind of imports that we have and the credit that we had last year and show a growth of 4.3 percent. There is something that is not being captured. We are aware of that and we want to deal with it systematically.”
Mwau said Kenya plans to issue its first foreign-currency denominated Eurobond in mid-2013.
“Countries comparable to Kenya that are going now are getting less than 6 percent but Kenya is not ready for various reasons,” he said. “We plan to go some time mid-next year. It can be anything between $750 million and $1 billion.”
He criticised a directive by the Ministry of Natural Resources requiring mining companies to cede a 35 percent stake to local shareholders, saying it could discourage investors.
The directive sent shares of Australia’s Base Resources down by more than 40 percent earlier this week.
“That is not the way to go. It is going to kill any interest in the mineral sector because it is not practical. Mining starts with a high-risk operation of exploration,” he said.
Mwau said the country’s interests could be ensured through fair revenue-sharing agreements, with the larger share of funds accruing to the government going to local communities where mines are situated.