The Monetary Policy Committee(MPC), the top think tank of the Central Bank of Kenya(CBK) retained the Central Bank Rate at 7% during the meeting held on Wednesday.
” The policy measures adopted in March and April are having the intended effect on the economy and are still being transmitted. The MPC concluded that the current accommodative monetary policy stance remains appropriate and therefore decided to retain the CBR at 7%,” said Dr. Patrick Njoroge, Chairman of MPC and Governor, CBK.
The MPC noted that all leading indicators of the Kenyan economy point to relatively strong GDP growth in the first quarter of 2020. This growth is, however, expected to weaken in the second quarter as the effects of COVID-19 on the economy become apparent.
The worst-hit will be transport and storage, trade as well as accommodation and the restaurant business.
CBK noted that improved food supply due to favorable weather, lower prices of international crude, reduced consumer taxes, and muted demand pressures will keep the inflation rate within the target range in the near term.
Lowering of the cash reserve ratio in March has to date released some KSh 35.2 Billion to the banking sector and continued to be transmitted throughout the economy.
To date, KSh 29.1 Billion of these funds or 82.6% has been channeled to support lending, particularly to the tourism, transport and communication, real estate, trade, and the agriculture sectors.
Banks have also restructured and extended repayment of personal loans to the tune of KSh 102.5 Billion with KSh 170.6 Billion in loans to manufacturing, tourism, real estate, and trade restructured.
In total, KSh 273.1 billion in outstanding loans to individuals and businesses have been restructured which accounts for 9.5% of the total banking industry’s loan book size of KSh 2.8 Trillion.
The CBK noted that the ratio of non-performing loans to gross loans stood at 13.1% in April compared to 12.5% in March. This deterioration has been attributed to the slowdown in real estate, trade, and manufacturing sectors.
The waiver of charges on the transfer of money from mobile money accounts to electronic wallets by CBK has seen the average number and value of bank to e-wallet transactions increase by 488,000 transactions per week, valued at KSh 166 Million.
The MPC observed that private sector credit grew by 9% in the 12 months to April, 2020. This growth was observed in manufacturing, trade, transport and communication, building and construction as well as consumer durables.
The Committee noted the recovery of the horticultural sector as volumes of exports increased. The sector will continue to benefit from lifting of lockdowns in most European cities, key destinations for Kenya’s vegetables, fruits and flowers.
The MPC said the recently announced Economic Stimulus package will cushion businesses and households from adverse effects of the pandemic.