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.
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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
"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.