Kenya

Kenya initially fixed its exchange rate (along with Tanzania and Uganda, the other members of the East African Community) to the USD, then to the SDR, with only limited monetary policy operations. The exchange rate peg was more frequently adjusted from late 1981 and eventually abandoned, while monetary policy moved gradually (and non-linearly) towards the pursuit of price stability via indirect monetary instruments.

Years	Targets and attainment	Classification
1974-81	January 1974 new central rate vs SDR implying return to former parity vs USD and no change in 1:1 relationship with Tanzanian and Uganda shillings; central bank (set up 1966) relies mainly on overall and sectoral credit controls and liquidity (and later cash) ratios, with few changes in interest rates; domestic credit strongly affected by funding of varying fiscal deficits and lending to SOEs; significant and growing banking and financial system; treasury bills and government bonds issued, some secondary market trading; depreciation vs SDR 1975, with no change to rate vs Tanzanian and Ugandan shillings; 1977 breakup of East African Community leads over time to diverging exchange rates between members; 1981 two devaluations vs SDR	augmented exchange rate fix AERF
1982-2017	1982-3 major devaluation followed by more frequent adjustments designed to stabilise real effective exchange rate; fiscal and monetary stabilisation efforts, not helped by external factors such as 1984-5 drought; interest rates come to be used more often; liquidity ratio and other controls imposed on non-bank financial intermediaries as well as banks; credit to private sector becomes more important; cash ratio, which had been abolished 1981, revived 1986; from 1987 efforts to develop primary and secondary government securities markets, also improved rediscount facilities; 1987 exchange rate peg switched to basket of trading partners; 1991 stated objectives include growth, inflation, current account, reserves and debt service ratio; further financial reform including interest rate liberalisation 1991 plus shift from credit controls to (essentially primary market) open market operations in treasury bills and cash ratio as main instruments, with focus on monetary aggregates, but monetary, fiscal and other policy slippages; much of 1990s political tensions, some aid withheld in concerns over political and economic reforms; 1993 forex crisis arising from domestic conflicts and mismanagement as well as external factors, large devaluations, some reform measures reversed, renewed stabilisation efforts; late 1993 unification of official and market exchange rates, rate set freely on interbank market; 1998 US embassy attack; as of 1998 development of financial markets (bills, bonds, interbank, forex) remains limited; smaller but recurring policy slippages; growing emphasis on price stability, while exchange rate vs USD is managed float; improvements in banking supervision to address periodic bank distress; 2007 increased use of repos in monetary operations; 2008 designated policy rate, but no corridor, and transmission mechanism to market rates weak; 2009 revision of flawed consumer price index; 2011 severe regional drought, associated with spike in food and overall inflation; 2011 revised monetary framework gives more prominence to policy rate, used together with repos and reverse repos to guide market interest rates; 2013 central bank moving gradually towards inflation targeting with improvements in forecasting; use of mobile money now widespread, which facilitates financial inclusion and SME investment; continuing disconnect between policy and interbank rates; late 2016 new interest rate controls limiting spread of lending and term-deposit rates above and below Central Bank Rate may reduce monetary policy effectiveness (and economic growth) and complicate introduction of corridor; macroeconomic statistics improved but significant gaps remain	loosely structured discretion LSD

Selected IMF references: RED 1973 pp39-40, 53-5, 69-73; RED 1974 pp33-4, 50; RED 1976 pp36-8, 49; RED 1979 pp36-7, 54; SR 1979 p8; SR 1980 p9; RED 1981 pp31-3, 49; RED 1983 pp53-4, 68-9; SR 1983 pp16-18; RED 1984 pp46-7, 50, 52, 54, 65-6; RED 1985 pp60, 62-3, 72; RED 1986 pp74-6, 92; RED 1988 pp43, 46; RED 1989 pp43-5; RED 1990 pp39, 41, 54; RED 1991 pp12-13; SR 1991 pp13-14, 17; SR 1992 pp7; SR 1993 pp2-7, 12-15; RED 1995 pp38-41, 51-2, 70; SR 1995 pp11-18; SISA 1998 pp11-16; SR 2003 pp22-4; Third Review Under Three-Year Arrangement under PRGF 2007 pp9-10; SR 2008 pp6-7, 10-11; SR 2009 pp9, 14-15; SR 2011 pp15, 40; Sixth and Final Review under Three-Year Arrangement under ECF 2013 p16; SR 2014 pp11-12, 21-3; Second Reviews under SBA etc March 2016 pp10-11; First Reviews under Twenty-Four Month SBA etc December 2016 pp5, 9-12; SI 2018 pp19-33; SR 2018 pp11-13, 19.

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