UPDATE 1-IMF disburses $110 mln to Kenya, warns against spending pressure

WASHINGTON Oct 24 (Reuters) - The International Monetary Fund on Wednesday approved a $110 million loan disbursement to Kenya under an IMF program and cautioned the authorities to resist a spending splurge before national elections on March 4.

"Going forward, it will be important to maintain policy discipline to build on the accomplishments so far," the IMF said in a statement, announcing the disbursement under a $750 million IMF extended credit facility agreed last year.

The Fund also cautioned Kenya, east Africa's biggest economy, to watch out for inflationary pressures that may emerge if global food prices should rise further. While global prices of some grains are higher, they are still lower than 2008 record levels.

Government statistics in September showed that Kenya's year-on-year inflation fell for the tenth straight month to 5.32 percent in September from 6.09 percent in the previous month.

"Given low inflation expectations, the Central Bank cut its policy rate recently, and there may be scope for further monetary easing if economic conditions warrant," the IMF added.

The Fund said economist activity was rebounding after slowing in 2011/12. The economy has been buoyed by foreign investment in oil and natural gas exploration and more stable economic conditions.

" Kenya has made progress in reducing its economic vulnerabilities," the IMF said, "Downside risks remain, however, because of global uncertainties and spending pressures associated with the upcoming elections".