Regulator retains Central Bank Rate at 7 per cent for seventh straight month

The monetary policy committee has maintained the Central Bank of Kenya Rate at 7 per cent for the seventh consecutive month citing positive impact of policy measures adopted by the government to steer the economy amid Covid.

The CBK said optimism remains on the rebound of the economy this year but warned of uncertainties arising from new coronavirus strains.

Kenya’s economy started recovery in the fourth quarter 2020 largely driven by strong performance in agriculture, construction, real estate, finance and insurance as well as wholesale and retail trade, said the finance industry regulator in a March 29 statement released after the first monetary policy committee meeting this year.

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“This recovery will be anchored on the success of the containment measures and the vaccination programme,” said CBK Governor, Dr Patrick Njoroge.

Last year, the CBK cut the benchmark lending rate by 125 basis points alongside trimming the cash-reserve ratio (CRR) to 4.25 per cent from 5.25 per cent freeing up KES35.2 billion in extra liquidity to banks to support lending.

In the 12 months to February, Kenya’s exports grew by 1.2 per cent compared to prior period in 2020 with receipts from tea and horticulture up 8.1 per cent and 3.4 per cent respectively.

Imports of goods, however, declined by 11.8 per cent in the 12-month period owing to depressed oil imports into the country. Equally, the pandemic’s impact on international travel was reflected in subdued receipts from services exports, the CBK said.

“Remittances remained strong at $260.3 million in February 2021, and at $3,155 million were 11.4 per cent higher in the 12 months to February compared to similar period in 2020,” the regulator said.

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In the banking sector, CBK said real estate, agriculture, personal and manufacturing sectors contributed the biggest increase in non-performing loans due to subdued business environment but overall the financial services industry remains strong and resilient.

“Cumulatively over the last one year, loans amounting to KES1.7 trillion were restructured. The outstanding restructured loans as at end of February amounted to KES569.3 billion,” added CBK.

Credit to the private sector is on the rise posting a 9.7 per cent jump in the 12 months to February.

Businesses in consumer durables are leading in loan uptake at 20.3 per cent, transport and communications 19 per cent, manufacturing 15.8 per cent, agriculture 13.4 per cent and real estate at 8.8 per cent, said the monetary policy committee statement.

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