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Kenya

CBK Retains Base Lending Rate at 7pc

NAIROBI, Kenya, Nov 27 – Central Bank of Kenya has maintained its benchmark lending rate at 7.00 percent, the fifth time in a row noting that the current accommodative monetary policy stance remains appropriate.

CBK’s Monetary Policy Committee through a statement on Thursday said that the policy measures introduced since the outbreak of the coronavirus disease to cushion the economy were having the intended effect.

“The Committee noted that the package of policy measures implemented since March were having the intended effect on the economy and are being augmented by implementation of the announced fiscal measures in the FY2020/21 Budget,” reads the MPC statement.

“The MPC will continue to closely monitor the impact of the policy measures so far, as well as developments in the global and domestic economy, and stands ready to take additional measures,” it added.

CBK first lowered the rate to 7 percent in April this year.

According to the bank regulator, the banking sector remained stable and resilient, with strong liquidity and capital adequacy ratios.

The ratio of gross non-performing loans (NPLs) to gross loans remained stable at 13.6 percent in October and August.

NPL increases were noted in the transport and communication, energy and water, tourism, restaurant and hotels and real estate sectors, mainly due to the disruption of businesses.

The banking sector also restructured loans amounting to Sh1.38 trillion by the end of October, in order to cushion Kenyans from the harsh economic environment occasioned by the coronavirus pandemic.

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“Of this, personal and household loans amounting to Sh303.1 billion have had their repayment period extended. For other sectors, a total of Sh 1,076.9 billion had been restructured mainly to trade (18.7 percent), manufacturing (22.7 percent), real estate (14.5 percent), and agriculture (12.8 percent),” added Njoroge.

At the same time, CBK revealed that Of the Sh35.2 billion that was released by the lowering of the Cash Reserve Ratio (CRR) in March, Sh32.6 billion (92.7 percent) has been used to support lending, especially to tourism, trade and transport, and communication, real estate, manufacturing, and agriculture sectors.

Private sector credit growth stood at 7.7 percent in the 12 months to October and was supported by the recovery in demand with the improved economic activity following the easing of COVID-19 containment measures, and accommodative monetary policy.

The Committee noted the continued implementation of the FY2020/21 Budget, including the Economic Stimulus Programme, to stimulate the economy and cushion vulnerable citizens and businesses from the adverse effects of the pandemic.

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