Central Bank of Kenya Maintains Lending Rate At 7%

Dr. Patrick Njoroge Governor of the Central Bank of Kenya at the panel discussion “Central Bankers and Inclusive Growth” at IMF Headquarters during the 2017 IMF/World Bank Spring Meetings in Washington, DC. April 22, 2017.©IMF Photo

The Central Bank of Kenya (CBK) has maintained its benchmark lending rate at 7.00% for the fourth time. The bank adds that the current monetary policy stance remains appropriate.

The Monetary Policy Committee (MPC) in a statement on Tuesday said that the current monetary policy remains appropriate and therefore decided to retain the Central Bank Rate (CBR) at 7.00%.

CBK first lowered the rate to 7% in April 2020.

According to the bank regulator, the banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios.

The ratio of gross non-performing loans (NPLs) to gross loans stood at 13.6% in August, compared to 13.1% in June.

NPL increases were noted in the real estate, personal and, transport, and communication sectors, due to a subdued business environment.

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At the same time, CBK disclosed that as a result of emergency measures it announced in mid-March to cushion Kenyans from the harsh economic environment occasioned by the coronavirus disease, personal loans amounting to 271 billion Kenyan Shillings had been restructured.

Other sectors such as trade, manufacturing, real estate, and agriculture were offered relief of loans that amount to 849.9 billion Kenya Shilling.

In line with this, total loans amounting to 1.12 trillion Kenya Shilling have been restructured which represents 38% of the total banking sector loan book of 2.9 trillion Kenya Shilling by the end of August.

CBK Governor, Patrick Njoroge added that out of the KSh35.2 billion released by the lowering of the Cash Reserve Ratio in March, KSh32.4 billion has been used to support lending, especially to the tourism, trade, transport, communication, real estate, and manufacturing sectors.

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Private sector credit growth meanwhile in the 12 months to August, stood at 8.3%, supported by continued recovery in demand from the COVID-19 related disruptions and the accommodative monetary policy.

The committee noted the continuing implementation of the fiscal policy measures announced in the FY2020/21 Budget, including the Economic Stimulus Programme, to stimulate the economy and cushion vulnerable citizens and businesses from the adverse effects of the pandemic.

The MPC added that it will continue to closely monitor the impact of the policy measures so far, as well as developments in the global and domestic economy, and stand ready to take additional measures as necessary.

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