The Central Bank of Kenya’s (CBK) Monetary Policy Committee (MPC) has, for the fourth consecutive time, retained the CBK’s policy lending rate at 7 percent.
“The MPC concluded that the current accommodative monetary policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR) at 7.00 percent,” Said CBK in a statement.
However, the unpredictability and severity brought about by the coronavirus pandemic left the 2020 economic outlook uncertain as CBK says the gradual recovery is expected in the second half of the year.
“After a sharp contraction in the first half of 2020, global economic activity is expected to recover gradually in the second half, mainly reflecting the impact of the lifting of COVID-19 containment measures and the effects of the fiscal and monetary policy measures put in place,” said CBK.
One month after the outbreak of coronavirus in Kenya, CBK cut the benchmark lending rate to 7 percent from 7.25 percent in March to support liquidity.
However, month-on-month overall inflation declined to 4.6 percent in June from 5.3 percent in May 2020, and is expected to remain within the target range in the near term.
This is supported by lower food prices, the impact of the reduction of VAT and muted demand pressures, according to CBK.
Total loans amounting to Ksh844.4 billion have been restructured (29 percent of the total banking sector loan book of Ksh2.9 trillion) by the end of June, in line with the emergency measures announced by CBK on March 18. Of this, personal/household loans amounting to Ksh240 billion (30 percent of the gross loans to this sector) have had their repayment period extended.
For other sectors, a total of Ksh604.4 billion had been restructured mainly to trade (22.9 percent), real estate (19.5 percent), transport and communication (16.3 percent) and manufacturing (14.0 percent).
Exports of goods have rebounded, growing by 1.7 percent in the first half of 2020 compared to a similar period in 2019.
Receipts from tea exports over this period increased by 18.4 percent with increased production.