By Edmund Blair
NAIROBI (Reuters) - Kenya's economic prospects look more favourable and foreign investors seem undeterred by a trial of Kenyan president and his deputy on charges of crimes against humanity in The Hague, a senior IMF official said on Monday.
Kenya's situation had improved from three years ago, when it faced the impact of two consecutive droughts and the fallout from the global financial crisis, that cause a sharp economic slowdown.
It was also coming to the end of an IMF Extended Credit Facility programme, that had provided $700 million over three years.
With growth running at 5.5 percent this year, International Monetary Fund Africa director Antoinette Sayeh said Kenya was in a "good place" to issue a debut Eurobond, which the government says could raise up to $2 billion later this year.
Kenya has long wanted a Eurobond issue but initial plans to raise $500 million were shelved after nationwide violence in early 2008 following a disputed election that stunted economic growth and later because of the global financial crisis.
Politics in Kenya has been overshadowed by the trials of Deputy President William Ruto's, which began last week, and President Uhuru Kenyatta, starting in November, raising fears that business confidence could be hurt by the uncertainty.
Both men, who won an election on a joint ticket in March, are being tried on charges of orchestrating violence after a vote more than five years go when they were in rival camps. They deny the charges and have pledged to cooperate with the court.
"Investors are very gung-ho on Kenya these days," Sayeh told reporters in Nairobi, when asked about the impact of the cases.
"Everybody is aware that there is a trial going on, yet they are certainly continuing to see that Kenya has very good economic prospects," she said.
Inflation was close to the government's 5 percent target, she noted, and Kenya's external position had improved.
Another IMF official said the current account deficit in 2012/13 had narrowed to 8.9 percent of gross domestic product, from 9.4 percent a year earlier, but said it would have recorded a small surplus and shown a bigger improvement when costly imports of energy industry equipment were stripped out.
Such imports have grown with the exploration and discovery of oil in Kenya, east Africa's biggest economy.
To fund infrastructure and retire more expensive debt, Kenya is choosing advisers for a Eurobond, expected later this year.
Analysts say borrowing costs for emerging markets could rise with any U.S. move to scale back bond purchases, or quantitative easing, drawing investors to higher yields in advanced economies.
"We don't see a major risk of large outflows from Kenya that it will not be able to sustain," Sayeh said, adding Kenya had a flexible exchange rate to deal with any potential outflows.