Central Bank of Kenya slashes GDP growth by half

Written By: Obrien Kimani
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The announcement by the Central Bank follows CBK’s approval on April 7, 2020 under Section 13 (4) of the Banking Act and approval by the Cabinet Secretary for the National Treasury and Planning on April 8, 2020 pursuant to Section 9 of the Banking Act.

Central bank of Kenya has halved this year’s economic growth projection to 3.4 from 6.2 percent.

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CBK blames the Coronavirus pandemic to the dim economic growth.

The bank through its monetary policy committee has further slashed the benchmark lending rate by one basis point to 7.25 percent.

Kenya has so far reported 16 cases of the viral disease.

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In the last one month the Kenyan economy has been battered by serious headwinds caused by the Corona virus pandemic.

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The Nairobi securities exchange has lost almost 20 percent of its value while the Kenya shillings has sunk to a fifteen year low closing the trading day at a 106.

The government has so far banned flights to and from infected countries, cancelled meetings and conferences while urging people to stay at home.

This is expected to hit the economy really hard, with the Central Bank of Kenya halving its year 2020 economic growth projection to 3.4 percent from 6.2.

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The bank says disruption in supply chain and low tourism numbers will hurt the economy.

Kenya airways have banned all international flights in a bid to deal with the pandemic.

The bank has further reduced the cash reserve ratio for commercial banks from 5.2 percent to 4.2, a move that will release more than 30 billion shillings for onward lending.

Foreign reserves currently stand at 826 billion shillings which is enough to support the economy for 5 months in case of a major fiscal crisis.

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Economist analyst Ally Khan Satchu says the bank needs to come up with more radical steps like cash transfer initiative to rural communities to spur spending.

The monetary committee has also agreed to meet next month to review the situation as the country outlines more measures to deal with the pandemic.

Central bankers from the Reserve bank of US to the EU central bank have all slashed benchmark lending rates to spur lending and economic growth.

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