Africa Notes: The IMF and Africa: Kenya - May, 1984
May 29, 1984
Kenya's experience with the International Monetary Fund in the 1980s provides a pertinent case study from which to attempt to draw some general conclusions about a model relationship between the IMF and a country with an economy and balance-of-payments problems that cannot be described as typical but are not unique in Africa. First, Kenya suffered from government deficit financing that diverted the domestic banking system's funds away from the private sector. Second, the national currency (Kenyan shilling) was overvalued, inhibiting export growth. Third (as has been true for the majority of the world's nonoil developing countries), the international economy's high interest rates, depressed demand for primary commodities, and high oil import prices combined to worsen Kenya's terms of trade. If one uses 1976 as a base period (1976 = 100), the country's terms of trade deteriorated 31 .1 percent between 1978 and 1982.