CBK cuts main lending rate to near 9-year low

The Central Bank of Kenya (CBK) Wednesday cut its benchmark rate further to a near nine-year low of seven percent in efforts to boost flow of cheap loans in an economy plagued by the coronavirus pandemic.

The benchmark rate was cut from 7.25 percent in March and 8.25 percent in January, a pointer of policy bias towards cheaper loans in an environment where the government is not controlling cost of credit.

Banks already have cut the cost of credit to the lowest level in 15 years following the drop in the benchmark rate and a reduction in demand for new loans, cutting average borrowing costs to 12.19 percent in February.

The bank’s monetary policy committee said in a statement it forecast economic growth of 2.3 percent this year, down from its March forecast of 3.4 percent, and from its estimate of 6.2 percent earlier this year, in the wake of coronavirus

The government has responded by tough travel, mass gathering and isolation rules to curb the spread of coronavirus — which have curtailed economic activity.

CBK said loans amounting to Sh81.7 billion have so far been restructured by banks including to hotels, tourism players and real estate struggling with repayments amid reduced cash flow.