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Treasury Cabinet Secretary Henry Rotich says the government will ensure that government borrowing does not crowd out the private sector/PSCU

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Measures enforced to lower interest rates – Rotich

Treasury Cabinet Secretary Henry Rotich says the government will ensure that government borrowing does not crowd out the private sector/PSCU

Treasury Cabinet Secretary Henry Rotich says the government will ensure that government borrowing does not crowd out the private sector/PSCU

NAIROBI, Kenya, Jun 25 – The government has introduced measures to lower interest rates in the country that include cutting down lending from the private sector in the 2014/2015 financial year.

Treasury Cabinet Secretary Henry Rotich says the government will ensure that government borrowing does not crowd out the private sector.

“The government will review downwards the domestic borrowing plans for the next financial year, this will significantly reduce domestic interest rates which should boost investments, economic growth and provide more employment opportunities to our youth,” Rotich said.

He said the government will also adopt alternative sources for funding such as the sovereign bond while improving government cash management.

In the next financial year (2014/2015) all banks will use a transparent pricing framework to be known as the Kenya Bank’s Reference Rate that will be computed as an average of the Central Bank of Kenya rate and the average 91-Day Treasury Bill rate.

“KBRR will be published by Central Bank of Kenya (CBK) and will be effective for six months period, following the announcement of the KBRR by CBK will then price their flexible rate loans using the formula KBRR + k where k is the premium to be loaded to the reference rate and many depend on various factors that include banks’ cost of doing business and the borrower’s credit profile and product type,” he stated.

He said that all new loans issued after July 1, 2014 will be priced using the new framework.

Rotich said that the government will also introduce an annual percentage rate for loans by the banking sector and also promote full disclosure of bank charges to facilitate informed banking decisions by the public.

The government also plans to implement the positive information sharing on credit by banks and expand information sharing mechanism to other credit service providers.

“The government will also implement Treasury Mobile Direct System to enable retail investors directly participate in government securities Market as well as fast track capital markets reforms to make capital markets more efficient and attractive alternative source for long term funds,” he said.

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They will also implement National Payment Systems (NPS) regulations to fast truck sharing of infrastructure by the banking sector.

Credit for large housing development projects will be targeted at lower income buyers for ownership with both the national and the county governments exploring availability of land for development of larger affordable housing projects by private developers.

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