NAIROBI, Kenya Mar 24 – Central Bank of Kenya Governor Patrick Njoroge Tuesday said the COVID-19 pandemic is unlikely to affect the country’s inflation with the import and export sector likely to be worst affected.
In February, the country’s year-on-year inflation had risen to 6.37 percent compared to 5.78 percent registered January mainly due to an increase in the prices of several food items.
Njoroge said despite the pandemic, the inflation is expected to decline towards midpoint of around 5 percent
“Inflation is not a concern anymore and we expect it to decline towards midpoint of around 5 percent , food inflation is expected to come down, tomatoes whose prices had risen have come down. Non-food like fuel remains low and stable, concerns about inflation are low,” he said.
In his statement, he said the pandemic will mainly affect the output sectors which will push key growth drivers like flights and hotel bookings which will have a ripple effect on sectors like transport, tourism among others.
He further said that oil imports and flower/horticulture exports will be among the worst hit sectors due to the reduced connectivity globally.
“Clearly the externally sector will be affected, what is clear is that we are at a point where there is no space in aircraft and also, there will be a decline of imports, most importantly oil,” he said.
He said the Government is planning to source imports from other unaffected parts of the world but is being hindered by poor connectivity caused by cancellation/suspension of flights.
The Government is seeking more than USD 1 Billion from the International Monetary Fund (IMF) and World Bank to fight corona virus pandemic.
The IMF is expected to provide 350 million USD in budget support as non- conditional emergency assistance and World Bank will provide assistance of USD million 750 and an additional USD 50 expected in the near future.
“These funds are coming in to support the oppression coming and to boost reserves to ensure the Balance of Payment (BoP) does not move significantly.
“We have adequate reserves to cover and buffer against shocks and the Government will work with IMF to provide insurance against shocks,” he said.
Njoroge said foreign exchange markets have remained balanced but with volatility.He says the dollar has surged the most.
According to the CBK boss, the country will likely experience a drop in diaspora remittances since many Kenyans abroad are not working effectively during this period.
Nonetheless, the Central Bank has issued policy actions, fiscal considerations to enable the country to remain resilient in the face of the novel virus which has claimed more than 17,000 worldwide.
The Kenya’s CBK is among 38 central Banks from around the world which reduced the lending rate in a bid to stimulate slowing growth caused by the corona virus pandemic
The CBK 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 corona virus pandemic.