CBK wants food distribution systems enhanced

March 28, 2011
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, NAIROBI, Kenya, Mar 28- The Central Bank of Kenya (CBK) on Monday said there was need to enhance food distribution systems to ensure adequate supply of grains in all parts of the country.

While drought is still prevailing in some parts of the country, others particularly the food producing areas are receiving adequate rainfall which means that agricultural products will be available.

Governor Prof Njuguna Ndung\’u said the availability of food in the country would help to ease inflationary pressures which have been creeping up in the last few months driven largely by the high cost of food.

“The predictions are that there will be an equal distribution of rainfall but there will be no drought. That’s good news for us because in the food basket areas, they will produce the food and what remains will be to improve the distribution mechanism,” the Governor said.

Currently, food and non alcoholic drinks constitute about 56 percent of the Consumer Price Indices (CPI) basket which consequently is fuelling inflation. With adequate food supply, this is expected to ease in the short term.

At a press conference, Prof Ndung\’u said that with the persistent drought and high oil prices, the government needs to look for alternatives for example through sourcing for oil from neighbouring countries in order to reduce the effect of these shocks on the economy.

Further, he reckoned that it is time the government to set up national reserves through organisations such as National Oil Corporation and the National Cereals and Produce Board for both food and oil to act as buffers to the market.

Although the effects of the dry spell and high oil prices are not likely to be devastating as was the case in 2009, the CBK through its Monetary Policy Committee (MPC) pledged to continue coming up with policies that ease the pressure on the economy.

This was the case last week when the committee raised the Central Bank Rate by 25 basis points to six percent as a measure to contain inflation and stabilise the exchange rate while protecting the economy.

Although the skyrocketing international oil prices and the devastating tsunami in Japan pose a threat to the Kenyan economy, there is a lot of optimism for a strong growth from the private sector this year.

However, the governor underscored the need to continue investing in initiatives that complement those of the private sector in order to reduce the cost of doing business, enhance their profitability and drive growth.

But the private sector especially banks need to reciprocate such gestures and lower their lending rates so as to expand access of affordable credit in the country. Despite the strong performance of the banking industry, the interest rates spread has remained high, a scenario that continues to be a matter of concern for the Central Bank.

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