The Central Bank of Kenya (CBK) has left interest rates unchanged for the tenth straight time at seven per cent noting its accommodative monetary policy stance remains appropriate
The Monetary Policy Committee (MPC) meeting on Tuesday however noted rising inflationary pressures both domestically and internationally but expects the rate of inflation to hold at within the medium term target of 2.5 per cent and 7.5 per cent.
The overall rise in the cost of living stood at 6.6 per cent in August representing a slight jump from 6.5 per cent in July on account of increase in food and fuel prices.
Central Bank noted that inflation pressures are expected to be elevated in the near term owing to increase in fuel prices as well as the rollout of new tax measures in the current financial year.
The CBK says leading economic indicators point towards a strong rebound in the economy in 2021 following the 0.3 per cent contraction in GDP experienced in 2020 owing to the impact of the COVID-19 pandemic.
According to the banking regulator’s Private Sector Market Perceptions Survey, CEO’s survey as well as Survey on Hotels, there is optimism about economic rebound this year riding on easing Covid-19 curbs as well as ongoing vaccination campaign.
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Private sector credit growth has improved slightly to 7 per cent 2021 from a lower 6.1 per cent recorded a month earlier.
Meanwhile, banks continue to see an improving asset quality with the ratio of non-performing loans easing to 13.9 per cent in August from a higher 14 per cent in June.
Businesses in tourism, restaurants, hotels, building and construction have resumed repayments, noted CBK.
Credit uptake by the private sector also surged by 7 per cent in August from 6.1 per cent a month earlier with firms in the transport and communication as well as manufacturing accounting for the bulk of loans taken.
Kenya’s exports have remained steady, growing at 11.5 per cent between January and August compared to a similar period in 2020.
Receipts from agriculture and finished goods exports rose by 25 per cent and 39.1 per cent in the eight months to August compared to a similar period last year.
Further, Kenya’s imports also went up by 22.9 per cent in the period January to August compared to a similar time in 2020 on account of rising oil import bill.