Kenya faces growing fiscal consolidation challenges

Significance

The weakness of the Kenyan shilling, which is constantly hitting new record lows, has generated so much concern that, on October 24, parliament summoned the central bank governor to outline his plans to halt the currency’s decline.

Impacts

• The central bank will likely only consider lowering interest rates after the first cuts in developed countries.
• China will likely accept some debt restructuring but will remain reluctant to grant major new loans.
• The current account deficit is expected to remain at over 4% for several years, putting continuous pressure on foreign exchange reserves.