CBK lowers key rate to spur credit uptake as banks freeze loans
Business
By
Brian Ngugi
| Aug 07, 2024
The Central Bank of Kenya (CBK) has lowered its key interest rate to 12.75 per cent from 13 per cent in a bid to spur credit uptake, as banks have been freezing loans amid a deteriorating economic environment.
The Monetary Policy Committee (MPC) of the CBK, which was chaired by Governor Kamau Thugge, noted that its previous policy measures had lowered overall inflation in Kenya to 4.3 per cent in July 2024, below the mid-point of the target range.
Non-food non-fuel inflation also eased to 3.3 per cent, reflecting the impact of monetary policy actions, Thugge said.
"The Committee further noted that non-food non-fuel inflation has moderated, while central banks in some major economies have lowered interest rates in response to easing inflationary pressures, with indications that other central banks will soon embark on a similar trajectory," the CBK said in a statement.
READ MORE
Tharaka University student drowns in River Kathita
Lawyer Nyachoti seeks to withdraw from Sh145 billion KCB case
What Ruto at 4 "Scorecards" tell us about data anarchy
Health sector calls for urgent recovery after nurses' strike
Public hospitals struggle to resume services as families blame government
Government blew 30.60b on travel last year
Rex Masai inquest closed after DPP calls 30 witnesses
Senate asked to reject Bill seeking to allow inter county transfer of staff
Court: Gen Z protester Evans Kiratu was killed unlawfully perpetrator not identified
The MPC concluded that there was scope for a gradual easing of the monetary policy stance while ensuring continued exchange rate stability. The CBK's foreign exchange reserves stand at $7,303 million (964 billion) or 3.78 months of import cover, providing adequate cover and a buffer against short-term shocks, it said.
With borrowers unable to repay their loans the ratio of gross non-performing loans to gross loans stood at 16.3 per cent in June 2024, up from 16.1 per cent in April, said CBK.
This increase in bad loans was attributed mainly to a 1.5 per cent decrease in gross loans, compared to a lower 0.7 per cent decline in NPLs.
Growth in commercial bank lending to the private sector stood at four per cent in June 2024, down from 4.5 per cent in May, as banks shunned borrowers.
CBK however said this also partly reflected exchange rate valuation effects on foreign currency-denominated loans following the appreciation of the Kenyan shilling.
The MPC's decision to lower the Central Bank Rate is aimed at stimulating credit growth and supporting the economy, which is projected to grow by 5.4 per cent in 2024, down from 5.6 per cent in 2023.
The outlook, however, remains subject to risks, including geopolitical tensions.
Kenyan banks becoming engine behind East Africa's economic growth
Kenya’s economic growth is trailing its East African peers, raising questions about why the region’s largest economy has struggled to keep pace.Kenya eyes share of Sh780 trillion Shariah-compliant finance market
Kenya's financial sector is targeting a slice of the rapidly growing $6 trillion (Sh780 trillion) global Islamic finance market.European lender unveils Sh12.9bn facility to boost Kenya trade finance
Kenyan traders and manufacturers will have access to longer-term dollar loans at more predictable costs under a new $100 million (Sh12.97 billion) funding programme by the EBRD.DRC joins Pan-African payment system as Central Bank governors elect Interim chair
The Central Bank of Congo has formally joined the African Payments and Settlement System (PAPS)When illicit becomes normalised
Kenya’s counterfeit and illicit-trade problem is an economic, public-health and governance issue rather than merely an enforcement challengeMOST READ
Kenyan banks becoming engine behind East Africa's economic growth
FINANCIAL STANDARD