The Central Bank of Kenya (CBK) will publish a White Paper on how it is strengthening its monetary policy framework, the International Monetary Fund says.
IMF says the regulator has been working to strengthen its monetary policy framework and will publish a white paper by June 2021.
According to the IMF, the paper will outline the requisite reforms.
“Once the COVID-19 shock abates and conditions permit, reforms will focus on refining the macroeconomic modelling and forecasting frameworks and improving the operations of financial markets, including fully developing a Centralized Security Depository that will improve monetary policy transmission and promote efficiency and transparency in the government domestic debt market,” in its latest IMF Country (Kenya) Report No. 21/72.
Other areas that the white paper will address include the improvement of communication of monetary policy decisions to make them more effective.
IMF says the monetary policy framework will be supported by reforms carried out to strengthen CBK’s internal capacity and enhance monetary policy transmission, including the repeal in November 2019 of interest rate caps on commercial bank loans under section 33B of the Banking Act.
“Additionally, to address concerns of illicit financial flows, corruption and counterfeits that targeted large denominations, the old series Ksh1,000 currency notes were demonetized successfully in an exercise that concluded on September 30, 2019.”
The key objective of the Central Bank’s Monetary Policy Committee is to maintain price stability in the economy, maintenance of low and stable inflation.
“The aim is to achieve stable prices, measured by low and stable inflation, and to sustain the value of the Kenya shilling. The Central Bank of Kenya Act Sections 4 and 5 provides that the Cabinet Secretary for the National Treasury shall, by notice in writing to the Bank, provide the price stability target of the Government at least in every period of 12 months. The target is provided at the beginning of the financial year,” the CBK says on its Website.
The Monetary Policy Committee is the organ of the Central Bank of Kenya responsible for formulating monetary policy.
The MPC meets at least every two months to make decisions aimed at ensuring that the supply of money in the economy is consistent with growth and price objectives set by the government.