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Kenya central bank says has space to cut rates, urges more measures

PUBLISHED: Tue, 30 Mar 2021 16:53:29 GMT

George Obulutsa

Reuters

NAIROBI, March 30 (Reuters) – Kenya’s central bank has room to cut its benchmark interest rate, its governor said on Tuesday, adding that other interventions were also needed to help economic recovery in the face of a coronavirus-induced slump.

Policymakers held the benchmark rate at 7.0% for the seventh time in a row on Monday, saying that a package of measures rolled out since last year had protected the economy from substantial decline.

“There is definitely space to cut interest rates,” Patrick Njoroge told a news conference.

More needed to be done to ensure that the economy can recover from the impact of the coronavirus, Njoroge said.

“The measures that will have the most impact are not the sort of demand management measures. It’s actually the structural measures,” he said — for example, offering more cargo freight space to fresh produce growers to help them export.

A new International Monetary Fund financing programme to Kenya worth $2.4 billion was likely to be approved by the IMF’s board next week, the central banker said.

“We expect that programme will be discussed by the IMF on Friday, April 2,” he said.

For nearly two years, Kenya has abandoned expensive commercial debt to cut back on ballooning repayments, while revenue collection has been squeezed by the pandemic.

However, the Treasury said last week that it was planning to go to the international capital markets later this year to issue two separate international bonds, partly to refinance maturing dollar bonds.

It was still too early for the central bank to assess the potential economic impact of new, partial restrictions the government imposed on Nairobi and four adjacent counties to curb the spread of the coronavirus, Njoroge said, maintaining the bank’s optimism about growth prospects for this year.

“The dynamism that was taking root towards the end of the year has been sustained,” he said.

(Reporting by George Obulutsa; editing by Duncan Miriri and Larry King)