Philippines’s Economic Growth Recovery Next Year

By Wonderland

The economic growth of Philippines will recovery next year and will reach to 4.2 percent as public spending recovers and private demand remains resilient in 2012 while the economic growth expected to average 3.7 percent in 2011, according to statement issued on December 12 in Manila. It said that Philippine GDP growth slowed in the first three quarters of 2011 owing to a fall in semiconductor exports and a temporary fall in public investment as new practices are put in place to improve the transparency and efficiency of government expenditure. However, the global environment remains a key risk to the outlook. Inflation is expected to remain within the target range this year and next, and the balance of payments to stay in surplus.

The Philippines is being affected along with other countries in the region by the fragile global economic environment, but macroeconomic conditions remain generally sound. The authorities’ policy management is supporting confidence and has built up room for a strong response should further negative shocks occur. The key challenge now is to navigate through the period of global uncertainty to maintain macroeconomic stability while building the foundations for faster and more inclusive growth.

Monetary policy has responded well to changing circumstances. Policy tightening in early 2011 helped to forestall inflation pressures, while the pause in tightening in recent months has been justified by extreme global uncertainty and low core inflation. Monetary conditions remain supportive of growth, suggesting that an easing of conditions is not needed at this time. If global downside risks or further negative shocks were to materialize, monetary policy could be recalibrated.

Fiscal policy should provide welcome support for growth in 2012, as expenditures rise from their unexpectedly low level this year. Over the medium term, the planned fiscal consolidation should strengthen the ability of the budget to respond to future shocks. Expenditure is being appropriately reoriented toward social and infrastructure priorities for inclusive growth. Higher revenue will be needed in order to meet these objectives. The authorities’ emphasis on strengthening tax compliance is appropriate and the Fund continues to support these efforts with technical assistance. In addition, it will be important to reform excises, rationalize fiscal incentives, and broaden the tax base.

The financial sector has been resilient to the global turbulence. Vulnerabilities from concentration and interest rate risks, real estate exposures, and potential spillovers from global financial disruptions need to be carefully monitored. It remains important that amendments to the Bangko Sentral ng Pilipinas (BSP) Charter be quickly approved to give supervisors stronger legal protection as well as allow the BSP to issue its own debt securities for more effective conduct of monetary policy and promotion of macroeconomic stability.

A New Chapter in China’s Reform and Opening

“On this tenth anniversary, and as we look forward for the next decade, I have two wishes that I would like to express. The first is that China’s involvement in the WTO helps us all in keeping this organization on the move towards more open and fairer trade. The second is that the WTO’s relevance for China keeps growing and helps this country to address its reform challenges. China has been and should remain important for the WTO. The WTO has been and should remain important for China,” WTO Director-General Pascal Lamy, said at a forum in Beijing on 11 December 2011 commemorating the 10th anniversary of China’s accession to the WTO.

 

Director-General Pascal Lamy

“Ten years is a long minute in China’s millenary history. And yet these ten years have witnessed an unprecedented transformation of China’s economy and society,” he said.

At the end of the 90s, China’s agriculture and automobiles were areas of particular concern to China as it finalised its accession to the WTO. Ten years later, the streets of Beijing are crowded with family cars, not bicycles. China has become the largest automobile producer and market in the world. Chinese agriculture has become more productive and efficient. Millions of Chinese farmers have moved to the cities, employed by a rapidly expanding industrial sector, including multinational corporations which have come into China at unprecedented speed since 2001 and played a key part in creating a network of global value chains.

China’s growth miracle did not start in December 2001. It predates its entry into the WTO. But joining the WTO was a means to anchor reforms and pursue the transformation. WTO membership has served as a stabilizer and accelerator in China’s economic take-off. 

China’s accession to the WTO proved decisive in several respects.

The goal to become a WTO member acted as a lever for the process of domestic modernization, he emphasized.

It generated trust by foreign investors who have been key actors in China’s take-off through Foreign Direct Investment and transfer of technology. 

WTO membership also underpinned Chinese export-led growth with a strong insurance policy against protectionism.

The commitments accepted by China as part of its entry into the WTO were demanding. In fact, many went well beyond what other emerging economies had accepted in the past. But China first took the decision to reform its economy for its own good, and it then decided to bind these reforms in the WTO. It was the result of a domestic choice that saw in the opening of the Chinese economy a way to grow, to develop, to reduce poverty and to provide Chinese citizens with a decent future. And the results have been impressive, also because of the accompanying policies put in place in parallel with trade opening.

Accession to the WTO strengthened China and helped lay down a more solid basis for China’s future development.

But as China develops, it also has to wrestle with tremendous challenges, such as regional and income distribution imbalances, the need for stronger social safety nets, environmental degradation and an ageing population. It is also working to achieve more balance between external and domestic demand, to foster a friendlier business environment and a better protection of intellectual property.

Just as China faces these challenges, the global trading system is also being severely tested. The delay in concluding the Doha Round is raising doubts about the WTO’s capacity to deliver further trade opening and global trade regulation. Behind this inability lies a key question to which WTO members must respond: what is the balance of rights and responsibilities between developed and emerging economies? The answer to this question holds the key to unlocking the Doha Round, as it does with addressing climate change negotiations under the UNFCCC.

On the other hand, the WTO risks crumbling under the weight of excessive expectations, especially in areas where its role is only modest, such as in addressing global macro-economic imbalances or currency fluctuations.

And yet the lesson learnt from the recent global economic crisis is that the WTO has a significant role to play as a bulwark against protectionism. This is particularly true of China which would have been much more severely affected by protectionist measures, given its prominence in world trade. The WTO has so far protected China against high intensity protectionism during the crisis.

Looking into the future, as a key member of the WTO family, China’s role and influence will be vital in our collective endeavour to advance trade opening and global trade regulation.

And this in turn is linked to the continuation of China’s reform and opening process. Understandably the pace of such reforms is a topic of debate within China. But the best argument in favour of such policy is that market opening, coupled with the right domestic policies, have worked for this country as well as for its trade partners. Anchoring in the WTO further reforms of China’s services sector or further opening of its procurement markets can bring welfare gains and can help sustain China’s growth for the next decades.  China can also provide tremendous opportunities for growth in other countries. Growing together is more stable and sustainable than growing alone.

Today, the Chinese economy and its influence are greater and stronger than ten years ago. As a global power, it is only natural that the expectations of other countries on China have also grown. China’s participation and support are vital in any collective action to address global challenges. With today’s economic difficulties across the world, resolve and leadership are in desperate need. We all need a proactive China.

“I was particularly encouraged by President Hu’s announcement at the Cannes G-20 Summit that China will provide duty and quota free market access to 97% of exports from the world’s poorest countries,  Pascal Lamy stressed. This is a good example of leadership and shows that China is willing to share its growing prosperity with other countries and to take on more global responsibility as it grows, he emphasized.

The first is that China’s involvement in the WTO helps us all in keeping this organization on the move towards more open and fairer trade.

The second is that the WTO’s relevance for China keeps growing and helps this country to address its reform challenges.

China has been and should remain important for the WTO. The WTO has been and should remain important for China.

Source: WTO

Christine Lagarde to Visit Nigeria and Niger on First Trip to Africa

International Monetary Fund (IMF) Managing Director Christine Lagarde will visit Nigeria and Niger from December 18–22, 2011, on her first trip to Africa since her appointment earlier this year. Ms. Lagarde will hear from policymakers, the African private sector, and civil society about the challenges facing African countries and underline the IMF's commitment to further reinforce the IMF’s partnership with Sub-Saharan Africa. 

“I am very much looking forward to my first visit to Africa as Managing Director of the IMF. Africa is a vital part of the IMF’s membership, and listening to the voices of the region, and strengthening our partnership, is one of my key objectives,” Ms. Lagarde said ahead of her trip. “African economies have made significant progress over the last few years. However, the world economy is in a critical phase, and in these difficult times, we have to make sure we all work together to tackle the challenges facing all IMF member countries, in Africa and around the globe.”

In Abuja, Ms. Lagarde will hold a series of meetings with the leadership of Nigeria, including President Goodluck Jonathan and Coordinating Minister for the Economy and Finance Minister Ngozi Okonjo-Iweala. In Lagos, she will take part in a round-table discussion on “Africa’s Future: Responding to Today’s Global Economic Challenges”, alongside the private sector, academia, civil society organizations and research institutes.

In Niger, Ms. Lagarde will meet with President Mahamadou Issoufou and take part in a cabinet meeting focused on “The Challenges of Economic Development in Niger”. She will also address the National Assembly, and meet with representatives of the financial institutions and the private sector.

Knowledge Sharing Workshop on Climate Change Adaptation

The Ministry of Agriculture, Forestry and Fisheries and UNDP Cambodia is organizing a knowledge sharing workshop on climate change adaptation on December 13-14 in Phnom Penh.

This workshop will present practical examples of community-based efforts to adapt to climate change. They include development of community-based early warning information system, efficient water use, climate resilient irrigation structure and new techniques of agricultural practices.

The early warning information system is designed to provide farmers climatic information in their areas for farming planning and natural disaster alert. There are also experiences of improving water use with various tools such as ponds, pumping wells, rain-water harvesting tanks, and water filters.

The lessons also show how to integrate climate-related studies into irrigation construction schemes such as reservoirs and canals to make them durable despite of natural disasters. More significantly, there are demonstrations of new rice seeds that could resist to floods and droughts for two weeks.

A UNDP-supported project and led by the MAFF, known as Promoting Climate Resilient Water Management and Agricultural Practices in rural Cambodia, is demonstrating these practices to farmers in Preah Vihear and Kratie provinces.

The project is currently working in only two provinces, but it aims to have lessons learned replicated and up-scaled to other parts of the country.

Emirates Launches A380 Connectivity

Customers on a growing number of Emirates A380s can now surf, share, email, or tweet their way across the Emirates network as the airline launches Wi-Fi internet connectivity with leading industry service provider, OnAir.

Customers can access the service of the Wi-Fi in the sky onboard their flight using their Wi-Fi enabled devices including smart phones, tablets and laptops. All customers have to do is open up their device’s wireless connections, log on to the OnAir network and follow the simple steps to access the internet. As part of a proving phase, customers onboard many A380 flights have been using the service for many months already as the system was installed and activated on the first few A380s last year.

“Emirates recognize that being connected inflight is increasingly important especially on our longer flights. Adding internet access is going to be a vital and ubiquitous part of any in flight experience, just as it is in everyday life on the ground,” said Patrick Brannelly, Vice President Corporate Communications. “As a result of our testing, we were able to learn a lot about what people like to do with the internet in flight and are pleased to be able to launch with very affordable pricing options.”

“Emirates has led the way in mobile phone use onboard with 91 aircraft currently allowing the service,” he added.  “We are obviously delighted to launch OnAir Wi-Fi on our A380 Aircraft and we will continue to invest in additional communications products across our entire fleet.”

Wi-Fi services will initially launch on 11 of Emirates 19 Emirates A380s currently in-service, with the system due to be installed both now and in the future across the entire fleet of 71 Emirates A380s on order. In addition to Wi-Fi, from mid-2012 all new Emirates A380s will be delivered with a full range of Wi-Fi, mobile phone and mobile data services.

“Emirates is continuously introducing the latest advanced technology to its customers for use on board out fleet. Making inflight connectivity available is a value added service that Emirates customers will highly enjoy; this is particularly true of our A380 fleet, since the aircraft is the epitome of modern airline technology,” added Adel Al Redha, Emirates Executive Vice President, Engineering and Operations. “With the OnAir product onboard, Emirates ensures our passengers will enjoy being connected in the sky on our most advanced aircraft.”

Price plans start at just US $7.50 for mobile devices and US $15 on laptops for generous data packages that allow plenty of internet at an accessible price. The US $7.50 package should be sufficient for the average Blackberry user to stay connected all the way from Dubai to Paris – a flight of over six and one half hours.

“The fact that Emirates has chosen OnAir connectivity services for its A380 fleet validates our strategy of developing a SwiftBroadband-based consistent global service. With the significant expansion of the Emirates A380 aircraft and global route network, it is important for passengers to access connectivity services anytime and anywhere,” said Ian Dawkins, CEO of OnAir.

Second Taiwan Bank Get Approval in Cambodia

The National Bank of Cambodia has approved Taiwan’s Cooperative Bank to establish a branch in Phnom Penh, reported Taiwan’s Economic Daily News.

It is the second Taiwanese bank, following from Mega International Commercial Bank opened in early October, to enter Cambodia’s banking sector, which experts have said is overcrowded – 38 banks operating in the Kingdom. The bank has 306 domestic and overseas branches in countries such as the Philippines, China, and the United States, according to the website.

The Taiwan Cooperative Bank is a publicly listed bank headquartered in Taipei City, Taiwan. Originally formed by the Japanese during the Taiwan under Japanese rule in 1923, TCB was taken over by the Republic of China government since 1946 and has been prospering. Nowadays it is one of the most prominent banks in Taiwan, having the most branches (301) among all banks in Taiwan. The Taiwanese government owns nearly 40% of the bank.

U.S. Marines, Cambodian Forces Continue Humanitarian Assistance and Disaster Relief Cooperation

U.S. Marines and Royal Cambodian Armed Forces will jointly participate in a humanitarian assistance and disaster relief exercise December 12-18, 2011 in the vicinities of Phnom Penh and Sihanoukville. U.S. Marines and Sailors from the 11th Marine Expeditionary Unit and Amphibious Squadron 5 aboard the USS Pearl Harbor and USS New Orleans will exchange experiences with Cambodian forces pertaining to humanitarian assistance and disaster relief response, as a means to enhance professional relationships and coordination between the two forces. Components of the exchanges include an engineering civic action project, medical and mass casualty response drills, platoon maneuvers, and a community relations-building blood drive campaign.

“This exercise serves as another example of how U.S. and Cambodian forces can work together, increase each other’s cultural understanding, enhance capabilities, and improve coordination, while providing services to areas and individuals in need,” said Jeff Daigle, U.S. Embassy Chargé d’Affaires, a.i.

Humanitarian assistance and disaster relief exercises strengthen the relationship between the U.S. and Cambodian armed forces, while also improving the ability of Asia-Pacific nations to work together effectively to provide relief and assistance in the event of natural disasters and crises.

UNESCO Goodwill Ambassador, Mr. Herbie Hancock, Visits Cambodia

The Goodwill Ambassador of UNESCO, Mr. Herbie Hancock, will undertake a visit to Cambodia from 9 to 16 December 2011. Mr. Hancock, a driving force of important movements in music since the 1960s, is a renowned jazz musician and the winner of an Academy Award and 14 Grammy Awards. He has been officially designated as ambassador at UNESCO headquarters in Paris on 22 July 2011. Goodwill Ambassadors are celebrities who contribute to UNESCO’s work in the fields of education, culture, science and communication and information through disseminating the agency’s core values and aims.

Mr. Herbie Hancock 
The Goodwill Ambassador of UNESCO

UNESCO Director-General, Ms. Irina Bokova has expressed her hopes that Mr. Hancock will “contribute to UNESCO’s efforts to promote mutual understanding among cultures, with a particular emphasis on fostering the emergence of new and creative ideas amongst youth, find solutions to global problems, as well as ensure equal access to the diversity of artistic expressions.” His status as a musical icon around the world will allow him to promote the ideals of peace and intercultural dialogue by bringing people together through music, arts and culture.

During his short visit, Mr. Hancock will hold several meetings with key members of the Royal Government of Cambodia and attend the 18^th Plenary Session of the International Coordinating Committee for the Safeguarding of Angkor in Siem Reap. He will also visit Angkor, a UNESCO World Heritage Site, and the Biosphere Reserve at Prek Toal (Tonle Sap). Next week, Mr. Hancock will have a royal audience with His Majesty King Norodom Sihamoni at the Royal Palace.

There are about 45 UNESCO Goodwill Ambassadors who volunteer to take on this important role. Other ambassadors include Nobel Peace Prize laureates Nelson Mandela of South Africa and Rigoberta Menchú of Guatemala.

“Improving the Management and Proper Use of Pesticides and Fertilizers for Enhancing the Agricultural Production in Cambodia” Seminar

Ministry of Agriculture, Forestry and Fisheries (MAFF) and Japan International Cooperation Agency (JICA) will jointly organize a seminar on “Improving the Management and Proper Use of Pesticides and Fertilizers for Enhancing the Agricultural Production in Cambodia” through the Project of Capacity Building for the Quality Standard Control of Agricultural Materials (Chemical Fertilizers and Pesticides) (QCAM) on 14th December 2011 in Phnom Penh.

This final seminar of QCAM Project is aimed to create a platform to share information on activities and achievement of the QCAM Project as well as on the updated draft list of pesticides in Cambodia, and to discuss proper use and management of pesticides and chemical fertilizers in Cambodia.

More than 150 participants from relevant Departments of MAFF and the other Ministries dealing with pesticide and fertilizer management, relevant Development Partners, NGOs, Universities, Research Institutions and licensed manufacturers and distributors of pesticides and chemical fertilizers, Embassy of Japan, and JICA are expected to join this seminar.

The main guest speaker of the seminar is Dr. Keiji Tanaka, JICA Expert on registration and management of pesticides from Japan who has more than 30-year experiences in this field. He will cover the topic on “Review of the Pesticide List and Pesticide Management in Cambodia”, while the QCAM Project will introduce its project activities and achievements.

TOWARDS FULL COMPLIANCE OF THE UNIVERSAL DECLARATION OF HUMAN RIGHTS

Every 10^th of December, the whole world celebrates the Human Rights Day to remember the importance of the rights to which all human beings are inherently entitled: equality, dignity, life, liberty, security, justice, education, health, freedom of speech, political participation and culture.The date was chosen to honour the United Nations General Assembly's adoption and announcement, in 1948, of the Universal Declaration of Human Rights.  In addition on this day it is a tradition that the United Nations Prize in the field of human rights and Nobel Peace prize are awarded. It is important for us to be reminded of the importance of human rights and to let these rights be protected and respected in our daily life and society.

These are not empty words for us; the European Union is highly committed to ensuring the full compliance of the Universal Declaration of Human Rights both within its borders and worldwide, including in Cambodia. In doing so, the EU partners with the United Nations. We believe it is an important advantage for Cambodia in its efforts to promote and protect human rights to have both an Office of the High Commissioner for Human Rights and a Special Rapporteur, who on this important occasion is in Cambodia to celebrate Human Rights Day with us.  It is also the EU's hope that Cambodia's acceptance of all the recommendations made under the Universal Periodic Review will serve as an example to others. The EU stands ready to support the implementation of these recommendations.

Within the EU, we are not complacent with regard to our human rights record. The EU continues to fight racism, xenophobia and other types of discrimination based on religion, gender, age, disability or sexual orientation. The EU domestically is particularly concerned about human rights in the area of asylum and migration. Human rights require a constant vigilance. The EU has gradually pushed the human rights issue to the forefront of its relations with other countries and regions. All agreements on trade or cooperation with third countries contain a clause stipulating that human rights are an essential element in the relations between the parties.

We strongly believe that in a country where people fully enjoy their rights there are better conditions to achieve sustainable development, social cohesion and good governance. That is why The European Union is supporting more than half of development assistance worldwide, worth €50 billion, to contribute to help some of the poorest people be able to invoke their human rights.

Human rights are a cornerstone of the European Union foreign policy; our commitment to human rights reflects our aspirations for a world in which everyone can live in freedom and security, free from fear and want.

The European Union works closely with Cambodia to raise the capacity of both the government and the civil society in order to build a firm base for long-term sustainable development. The EU seeks to strengthen democratic institutions, processes and actors collaborating on many different issues, such as indigenous people’s rights, land rights, women's rights; from legal and judicial reform to combating human trafficking and sexual exploitation.

Finally, no statement on human rights is complete without remembering that we all have a role to play. We can all be human rights defenders within our families, friends and neighbourhoods. We can all be involved in the promotion and respect of the human rights: from our rice paddies or our offices to our pagodas or social media networks, which today enhance our power as citizens. Participating in public debates or online fora gives us the opportunity and the responsibility of sharing opinions and ideas on how to build a better society.

Article by H.E. Mark Gooding, UK Ambassador, on behalf of the European Union

Cambodia and UNDP co-host Workshop on Micro-insurance, a social protection instrument to reduce vulnerabilities of the poor

The Ministry of Economy and Finance and the Council for Agricultural and Rural Development will organize the workshop on Micro-insurance, a social protection instrument to reduce vulnerabilities of the poor with support from UNDP and the UN Capital Development Fund (UNCDF) on December 13 in Phnom Penh.

“The objective of the meeting is to explore the importance of micro-insurance in relation to the implementation of Cambodia’s National Social Protection Strategy to prevent the poor from falling deeper into poverty,” statement from UNDP said on Sunday.

The discussion at this meeting will focus on strategic options for deploying micro-insurance services in support of the implementation of the Cambodian Social Protection Strategy, it added. Best practices from different countries will be presented by leading international practitioners, focusing on the replicability of them in the Cambodian context. Financing requirements for establishing micro-insurance as a tool of social protection will also be part of the discussion.

H.E. Ngy Chanphal, Secretary of State, Ministry of Interior, Vice Chairman of Council for Agricultural and Rural Development, will preside over the workshop. He will be joined by UNDP Country Director Elena Tischenko who will give a remark underlining the importance micro-insurance scheme in helping to reduce poverty.

Joint IMF-People’s Bank of China Symposium Calls for Strengthening Financial Stability Assessments in Asia and Worldwide

In the wake of the global financial crisis, authorities worldwide, including those in Asia, are stepping up their efforts to assess the health of their financial sectors in close collaboration with the International Monetary Fund (IMF). In the past two years, the IMF conducted its first-ever Financial Sector Assessment Program (FSAP) reviews of China and Indonesia, jointly with the World Bank. FSAP updates have been completed for Bangladesh, Cambodia, and the Philippines, and assessments are either underway or will soon be launched in India, Japan, Malaysia, and Australia.

“This stepped-up activity is consistent with the increased leadership role that Asia is playing in multilateral bodies such as the IMF and the G-20,” said Min Zhu, the IMF’s Deputy Managing Director, during a High-Level Regional Symposium held in Shanghai December 9-10 and organized jointly by the Fund and the People’s Bank of China (PBC). Attending were central bankers and financial regulators and supervisors from the Asia Pacific region, as well as from other parts of the world, and representatives from the Asian Development Bank, the Financial Stability Board, and standard setting bodies.

“Rigorous implementation of international standards and codes is critical in reducing financial risk,” said PBC Governor Zhou Xiaochuan in his keynote address at the Symposium. “China has benefitted from strict adherence to international standards in the banking reform since 2003, particularly with respect to the injection, raising and maintenance of high-quality common equity capital.”

Participants shared their experiences in responding to the global financial crisis, the implementation of new international regulatory standards, systemic risk identification and monitoring, and the application of macro-prudential policy frameworks. They also discussed how these lessons could be best applied in the context of the independent assessments performed under the FSAP. Increased demand for FSAPs, including in emerging Asia, has underscored its role as an important underpinning of global financial stability.

“While Asia has navigated the crisis relatively unscathed so far, there is no room for complacency,” Mr. Zhu added. “FSAPs represent a unique opportunity to strengthen and reshape their financial sectors, based on the lessons from the current crisis.”

As well as sharing their experiences, participants in the Symposium provided feedback and suggestions on recent improvements to the FSAP. For example, the FSAP has become more flexible by taking into account more country-specific needs. It has also benefited from an improved analytical toolkit, covering a wider range of risks, cross-border spillovers, and interactions between the financial sector and the broader economy.

Discussions at the Symposium also focused on how the FSAP could be adjusted further to take into account the need for continuing post-FSAP engagement and higher frequency monitoring; consistency in quantitative risk analysis; more candid and open engagement; and whether assessments of standards compliance have become more burdensome.

“The FSAP has played a useful role as an independent review. It is tough but fair,” said Jose Vinals, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department. “Not only has the program significantly strengthened the capacity and effectiveness of the IMF’s surveillance, but it has also greatly enhanced the authorities’ own efforts to monitor and manage financial stability.”

Referring to China’s particular experience, Mr. Zhou added: “China will further strengthen its financial stability, regulatory and supervisory framework and promote financial reform and development by incorporating the findings of the China FSAP as appropriate.”

The FSAP, established in 1999, is aimed at helping national authorities to identify financial sector vulnerabilities and design longer-term policies and reforms. As part of its analysis, the FSAP helps the authorities to assess the effectiveness of financial supervision against broadly accepted international standards; identify the source, probability, and potential impact of key risks to macro-financial stability; and assess the country’s ability to manage and resolve financial crises. As warranted, the assessment is followed up by technical assistance support in areas critical for preserving financial stability.

“The FSAP should continue to evolve, in response to the needs of member countries, including those in this region,” said Mr. Zhu. “Indeed, given the relative strength of financial stability in the region, future assessments of Asian members are likely to provide lessons and a source of best practices for others.”

In September 2010, the IMF made financial stability assessments under the Financial Sector Assessment Program a mandatory part of IMF surveillance every five years for 25 jurisdictions deemed systemically important based on the size of the financial sector and their global interconnectedness.

IMF and Approved Request for Augmentation of Access and US$143.67 Million Disbursement for Kenya

The Executive Board of the International Monetary Fund (IMF) on December 9 completed the second review of Kenya’s economic performance under a three-year arrangement under the Extended Credit Facility (ECF). The Board also approved an augmentation of access equal to 60 percent of quota, which would lead to a total access of 180 percent of quota, an amount equivalent to SDR 488.52 million (about US$760.63 million), under the ECF arrangement.  The Board’s decision enables the immediate disbursement of an amount equivalent to SDR 92.276 million (about US$143.67 million), bringing total disbursements under the ECF arrangement to an amount equivalent to SDR 200.836 million (about US$312.7 million).

Mr. David Lipton, First Deputy Managing Director and Acting Chair said that Kenya’s economy has continued to expand despite the challenges posed by the drought in the Horn of Africa, higher than expected food and fuel prices, and the uncertain global environment. The combination of external shocks and strong domestic demand, fueled by rapidly expanding credit has led to sharp increase in inflation, a widening of the current account deficit, and currency depreciation. The authorities are taking decisive measures to address these imbalances and to preserve macroeconomic stability.

Program implementation during the first half of 2011 was in line with the objectives of the ECF-supported program, he added. The fiscal position at end-June was significantly better than expected, as a result of strong revenue performance and strict expenditure control. Beginning September, the Central Bank of Kenya increased its policy rate substantially and maintained a tightening bias to discourage excessive credit growth, which had contributed to inflation and the current account deficit.

Sustaining high growth will require addressing macroeconomic vulnerabilities. The impact of the increase in international prices on the country’s external position will require fiscal and monetary policy adjustment. Monetary policy will need to remain geared towards reining in inflationary expectations. It will be complemented by strengthened fiscal consolidation to curb domestic demand, while protecting key outlays, including emergency food relief.

“Important structural reforms are under way. The Public Financial Management Law has been submitted to the Committee for the Implementation of the Constitution. The benchmark on the submission of VAT law is set to be met by end-January 2012,” Mr. Lipton said.

In completing the review, the Board also approved a modification of three performance criteria for end-December 2011 and end-June 2012 related to the net international reserves, the net domestic assets of the central bank, and the primary budget balance of the central government. The three-year arrangement under the ECF for Kenya was originally approved by the IMF Executive Board on January 31, 2011.