NAIROBI, Kenya, Mar 23 – The Central Bank of Kenya (CBK) has cut its benchmark lending rate to a record 7.25 percent from 8.25 percent, a move it said would prevent severe economic downturn caused by the coronavirus pandemic.
CBK joins more than 38 other Central Banks from around the world in reducing the lending rate in a bid to stimulate slowing growth caused by the coronavirus pandemic.
Additionally, CBK said it wants to support borrowers that are distressed as a result of the virus.
It will do this by reducing the cash reserve ratio for banks to 4.25 percent from 5.25 percent, which will lead to the release of Sh35.2 billion as additional liquidity.
“While the extent of the adverse effects of the pandemic on the Kenyan economy is still evolving, it is already evident that the impact may be severe,” CBK’s Monetary Policy Committee Chair Patrick Njoroge said in a statement.
At the same time, CBK revised the country’s economic growth, saying it expects a significant decline this year; growth in 2020 is therefore expected at 3.4 percent, from a baseline of 6.2 percent.
Analysts at Genghis Capital had anticipated the reduction on the lending rate on the back of mounting global risks, but said the cut would not bear the intended consequences on the economy.
“Monetary policy easing is unlikely to solve a complication brought about by a healthcare crisis,” the analysts told Capital Business.
The committee last met in January and cut the lending rate by 25 basis points, saying the economy was operating below its potential level and tightening of fiscal policy.