Nyorekwa, E.T., South Africa; Odhiambo, N.M., South Africa
This paper provides an overview of Kenya's economic, monetary and financial reforms - since its independence in 1963. In particular, the paper assesses the respective monetary policy frameworks, and the associated economic performance from 1963 to date (July 2014). It also explores the challenges facing the performance of monetary policy. Kenya has undergone a number of reforms since its independence - shifting from direct monetary policy to indirect monetary policy in the 1990s - as an important part of the IMF structural adjustment programs. In 2011, a monetary policy framework that targets monetary aggregates consistent with government inflation targets was adopted, with the Central Bank Rate (CBR) as the main instrument. The findings of this paper show that while monetary policy was largely inactive in the 1960s and the early 70s; as in many other developing countries, the associated macroeconomic performance exhibited by high growth rates, the balance of payment surplus, and the low inflation during this period, has not been fully replicated. The study also found that, although Kenya's financial sector is currently regarded as one of the most developed in sub-Saharan African countries, like many other emerging economies, the sector still faces a number of challenges. These challenges include: the intricacies associated with rapid financial innovations, the pursuance of multiple objectives, and the recent rising trend of domestic debt. © Enock T. Nyorekwa, Nicholas M. Odhiambo, 2014.