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Kenya's finance minister sees higher interest rate unwinding

29 October 2015, 21:33

Nairobi - Kenya's finance minister played down a recent surge in interest rates, telling lawmakers on Thursday that steady inflation and other factors were in place to ensure they came down.

The central bank has tightened monetary policy to support a weakening shilling, including raising its benchmark lending rate to 11.50 percent. Yields on 91-day, 182-day and 364-day bills have climbed above 20 percent in recent weeks.

"The underlying factors to ensure those interest rates come down are stable," Finance Minister Henry Rotich said, citing stable inflation which has been hovering at about 6 percent.

The minister was addressing members of the National Assembly's budget committee.

Businesses complain that high interest rates on commercial loans are preventing investment and expansion by local firms.

Also read: Kenya's Imperial Bank lost $335 mln in fraudulent deals

Kamau Thugge, principal secretary at the Finance Ministry, told Reuters that Kenya had signed a syndicated loan with an interest rate of 5.7 percent and he had previously said it was working on a two-year loan worth $750 million.

"This will help us address some of the interest rates pressure, which was the intention of going for the syndicated loan," he said on the sidelines of the session in parliament.

The government has said it wanted to seek external funding to avoid driving local rates up further.

When asked about shortfall in government revenue collection of 28 billion shillings ($275 million) so far this financial year that began in July, Thugge said the Kenya Revenue Authority "should be able to make up for it in the course of the year".

For the 2015/16 financial year, Kenya already forecasts a budget deficit amounting to 8.7 percent of gross domestic product, a hefty level that could rise further if expected revenues do not flow in as predicted.


- Reuters


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