International Funding: Kenyas Economy - Research Paper Example

The paper "International Funding: Kenya’s Economy" is a worthy example of a research paper on finance and accounting. The IMF is a Bretton Woods Institution that was formed in 1944 to correct the international monetary system. Such a monetary body guides the exchange system and facilitates the transfer of finances and capital to given countries. In turn, the IMF assumes a coordinating role in international trade. In Kenya, the IMF has supervised financial and economic policies of the country.

In this view, the Kenyan economy is structured in such a sense that it complements the economic strategies of other countries. Besides, the IMF has helped the Kenyan economy with loans that the country uses for various developmental programs. The IMF’s role in modifying the Kenya’s economy is a dual-sided phenomenon. The IMF has hugely participated in giving out loans to the Kenyan government for various developmental programs. For instance, during droughts, the IMF has assisted Kenya with loans that help in feeding the nation and stabilizing the agricultural sector towards meaningful production of food crops (Milkov, 2011).

Such a loan helps in stemming possible inflation in a country. In 2011, the IMF gave Kenya a loan that would assist the country in implementing fiscal constitutional reforms. The loan, therefore, is a fiscal stimulus that sets the country on a growth pedestal without constraining recurrent budgets such as wages, educational funding, and health funding (Boughton, 2006). In addition, the IMF has assisted the Kenyan economy through the structural adjustment programs. The SAP’s are crucial for readjusting an economy towards normalcy in cases of given financial and economic crises.

IMF and the World Bank helped Kenya in implementing SAP’s. The IMF observed that Kenya’s wage sector had expanded disastrously (Rono, 2006). Besides, the localization of Kenyan industries had created mass ownership of public sector utilities such as transport. Other problems included drought, increasing debt, high population growth, entrenching poverty, and disorganized markets. In receiving a structural adjustment loan, Kenya was to devalue its currency, lower its tariffs, and limit the government’s control of notable non-food commodities.

The SAPs operated in two phases. To begin with, the SAP’s would help towards short-run microeconomic adjustment that entailed the country operating within efficiency. In the second phase, the IMF policies would help in structurally adjusting the micro-economy for fast growth. The SAPs, however, has created several problems in the country. To begin with, the policies entailed forestalling employment of teachers for a long period thereby creating unemployment in the country. The IMF policies also significantly opened up the Kenyan domestic market for foreign goods that, hence, would destroy the growing domestic industries such as the textile entities.

The liberalization policies affected the exchange system as stakeholders perceived such policies as benefitting the international community at the expense of the domestic market. For instance, the devaluation of currency made Kenyan exports cheap in the foreign markets thereby attracting low revenues for agricultural goods. A healthy population highly strengthens the Kenyan economy in various ways. To begin with, a healthy population, whereby preventive care is emphasized, helps eliminate excess national health care costs.

In this view, the government can redirect such saved funds into other sectors such as education and agriculture. Redirecting funds into areas such as agriculture and manufacturing help spur economic growth since such areas directly contribute to GDP in terms of increased expenditure and revenues (Andrle, 2013). In addition, a healthy Kenyan population provides an active workforce for the economy. This is, especially, essential for the agricultural sector, as individuals possess the energy to carry out physically involving tasks.

Besides, a healthy population breeds healthy generations that participate in future developmental activities. A healthy population is also significantly motivated to participate in developmental activities that benefit future generations. This occurs because proper body health guarantees equally superb mental health. The government has used sizeable donor funding in solving the major problems in the Kenyan health sector. In the last decade, the government has used foreign aid funding towards solving an entrenched crisis of HIV/AIDS and Tuberculosis diseases.

For instance, in the 2005/2006 financial year, the World Bank gave Kenya 22 million dollars towards tackling the HIV/AIDS crisis (Korir & Kioko, 2009). While assessing the combined funding of the 2005/2006 financial year and the next budgeting year, it was found out that donor funding towards healthcare amounted to 4.96 % while the government contributed 1.16 %. In spite of this development, the IMF has restricted funding towards the Kenyan health sector since health care funding forms recurrent rather than capital expenditure.

Indeed, international funding and intervention have helped Kenya transform its economy. Through conditional funding, the SAPs have helped Kenya sustain efficient expenditure and production. On the other hand, such programs have created problems such as stifling of domestic industries. Certain monetary policies such as liberalized exchange systems, sometimes, have benefitted the international community at the expense of the Kenyan domestic economy. On a positive note, international funding has helped Kenya tackle unique problems, such as HIV/AIDS, in her health sector.

This occurs on the recognition that a healthy population significantly contributes to faster economic growth and development.