Although there is no specific, publicly available information directly addressing Kenya's compliance with the International Monetary Fund's (IMF) monetary policy transparency standard, suggestive data can be gleaned from a number of sources. The legislative underpinnings of CBK monetary policy functions and goals are generally clear and are contained in the provisions of the Central Bank of Kenya Act. The IMF's 2005 Report on the Observance of Standards and Codes for data dissemination discloses several specific problem areas. Insufficiently detailed Central Bank of Kenya accounts source data, inadequate procedures for the assessment of data consistency, and incomplete differentiation between preliminary and revised data all contribute to transparency difficulties. Kenya does not subscribe to the IMF's Special Data Dissemination Standard, but has posted metadata on the GDDS website since 2002.

General Overview

According to provisions of the Central Bank of Kenya (CBK) Act (1966, amended through 1996), "the principal object of the Bank shall be to formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices." An assessment of Kenya's monetary policy by K. Cheng, published by the IMF in 2006, enumerates the CBK's primary monetary instruments to include open market operations, reserve requirements, rediscount facilities, and lender-of-last-resort facilities (the latter two not having been used in recent times). While Cheng's paper focuses on a specific analysis of monetary policy implications, it addresses the issue of transparency as follows: "poor data quality, particularly the output data, is a concern [when attempting to interpret this data]. Specifically, given the large size of the informal sector, national accounts statistics may not capture important activities that are influenced by the monetary policy stance" (p. 20).

The IMF, in its 2005 report on the nation's Poverty Reduction Strategy, noted that Kenyan monetary policy remained focused on price and financial system stability. The CBK aimed to keep the annual inflation rate below 5%, and intended to rely primarily upon monetary targeting to achieve its goals. Policy instruments would continue to be open-market operations, cash-ratio requirements, and the use of rediscount facilities. Projections of a money supply increase rate of 8.1% by end-2007 were deemed to be adequate to support growth. Government credit was projected to decline by 37.6 in the same period, accompanied by a 14.9% growth in private sector credit. According to the report, the Kenyan government "is committed to making full use of exchange rate flexibility to respond to both medium and long-term exogenous shocks" (p. 36).

In an April 2007 press release, the IMF announced that recent Kenyan governance reforms have been directed toward strengthening institutions and improving transparency, but that more needed to be done. In particular, the Executive Board criticized the reporting of inaccurate information and stressed the need to more forcefully root out corruption. Kenya is not a subscriber to the IMF's Special Data Dissemination Standard (SDDS), but has been a subscriber to the less prescriptive General Data Dissemination System (GDDS) since October 29, 2002, according to the IMF's SDDS and GDDS websites.

The Principles

Clarity of roles, responsibilities and objectives of central banks.

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The publicly available information does not conclusively address Kenya's compliance with this principle. Section 4 of the Central Bank of Kenya Act establishes that the CBK's principle function is the formulation and implementation of monetary policy in such a way as to maintain price stability, foster liquidity and solvency, set and maintain a stable market-based financial system. To do this, it may employ such instruments as open market operations, reserve requirements, rediscount facilities, and lender-of-last-resort facilities (the latter two not having been used in recent times). Section 4(B)(3) of the CBK Act requires the CBK to make key financial data and information on monetary policy available to the public. The Act further requires that the CBK publish its monthly balance sheet and monetary policy statements. The IMF's 2005 Data Dissemination ROSC asserts that the Policy Analysis and Research Department (PARD) within the CBK is specifically tasked with the responsibility of compiling monetary statistics. The PARD's duties are not specifically addressed by legislation, but are regulated by CBK-originated guidelines.

Open process for formulating and reporting monetary policy decisions.

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The publicly available information does not directly address Kenya's compliance with this principle. However, according to the IMF's 2005 "Poverty Reduction Strategy Paper, Kenya is working to improve governance, and to this end has developed an integrated monitoring and evaluation system (IMES) (a part of the Economic Recovery Strategy). The IMES is designed to permit the government to evaluate the effectiveness of its programs and policies. It considers input, process, and output indicators, as well as indicators of outcomes and impacts. It attempts to accommodate the potential effects of external factors (conflict, weather, the world economy) through the implementation of a national research agenda that will call upon the resources of the academic and external donor communities. Its most important role will be to provide policy feedback. To identify the indicators used by the IMES, stakeholders will be consulted to develop a body of baseline data.

At the time that the IMF's 2005 Strategy Paper was published, a Strategic Plan for Statistics had been endorsed by the parliament, and the IMF judged that it would "ensure that the data required for poverty assessments and public policy evaluation are produced and disseminated regularly and in a timely manner" (p. 68). Improvements in data collection and analysis, as well as dissemination procedures, will fall under the auspices of the Central Bureau of Statistics (CBS). According to the IMF, the IMES framework is to be applied system-wide, allowing "maximum participation of the community, civil society, and all development partners at all levels" (p. 68).

Public availability of information on monetary policy.

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The publicly available information does not conclusively address Kenya's compliance with this principle. However, the IMF's 2005 ROSC reports that data is made available in both print and electronic versions. The CBK website is the location for electronic data, but its e-publications are not downloadable. Publication of CBK data is done on a regular schedule, but there is no formal advance release calendar published. The complete monetary policy dataset is published twice a year. Monetary data is released simultaneously to all interested parties. The CBK website offers public access to its primary methodological guidelines: Statistics Sources and Methods and Guidelines for Compiling Banking Statistics Returns. The CBK makes available the contact information for user inquiries on its website, but does not include the same information in its print publications.

The Central Bank of Kenya (CBK) Act establishes the CBK as the sole official agency responsible for compiling and disseminating Kenya's monetary statistics. Section 4 of the CBK Act mandates that the CBK's primary function is to maintain price stability, liquidity, and solvency of the banking system, and to formulate and implement monetary policies to achieve these ends. In addition, the CBK is responsible for Kenya's foreign exchange policy, the management of foreign exchange reserves, issuing currency, and other functions. Section 4(B)(3) of the CBK Act obligates the CBK to release key financial and monetary policy information to the public and requires the monthly issuance of the CBK's balance sheet and monetary policy statements. According to the IMF's 2005 ROSC, the Policy Analysis and Research Department (PARD) of the CBK handles the compilation tasks, and is regulated by CBK-originated guidelines.

On the CBK website, the Bank publishes an Annual Report, Monthly Economic Review, Weekly Release, Statistical Bulletin, and Monetary Policy Statement, along with two documents dealing with methodology: the Statistics Sources and Methods, and the Guidelines for Compiling Banking Statistics Returns. The website also contains a link to Kenya's metadata posted on the IMF's GDDS website. The IMF's 2005 ROSC also notes that the bank provides briefings to the Treasury and publishes its annual Financial Report in the Kenya Gazette.

Accountability and assurances of integrity by the central bank.

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The publicly available information does not conclusively address Kenya's compliance with this principle. With regard to the integrity of data, however, the IMF 2005 ROSC discloses several problem areas. The CBK balance sheet, from which the CBK accounts are compiled, is insufficiently detailed, nor is an appropriately detailed trial balance sheet employed to derive monetary statistics. Whereas the IMF acknowledges that "source data are checked for inter-temporal consistency, and their internal consistency is tested through a system of formal consistency checks" (p. 13), the report notes that there is no routine assessment of consistency in the corresponding data regarding interbank positions. The ROSC does state that the CBK's statistical work is largely automated. The report adds that the CBK relies solely on administrative sources, and that no statistical adjustments or revision studies are done, and that "preliminary and revised data are not clearly identified in CBK's publications" (p. 13).

In the Statement of Corporate Governance, included as a part of the 2006 Annual Report, the CBK asserted that "the Bank is committed to the highest standards of integrity, professionalism, and business ethics" (p. 76). The CBK has instituted an employees' code of ethics and conduct, with which all bank staff must comply. The report states that there are internal controls to ensure the accuracy and completeness of accounting data, and that bank expenditures are subject to comprehensive internal regulation. The CBK attempts to ensure the integrity of its own accounts through performance monitoring of its budget, done internally, and the resulting reports are provided to the CBK board of directors' audit committee.