Kenyans are faced with a growing economic crisis as inflation is on the rise with the Central Bank of Kenya further increasing the minimum lending rate imposed on loans by banks.
CBK governor Patrick Njoroge yesterday announced that the Monetary Policy Committee (MPC) had resorted to raising the rate to 8.25 per cent from 7.5 per cent.
According to the CBK, this is necessary in order to cushion lenders from the consequences of a spike in inflation rates occurring domestically and globally.
“The committee noted the sustained inflationary pressures, the elevated global risks, and their potential impact on the domestic economy and concluded that there was scope for a tightening of the monetary policy in order to further anchor inflation expectations. In view of these developments, the MPC decided to raise the Central Bank Rate (CBR) from 7.50 per cent to 8.25 per cent, “said the CBK governor in a press statement.
The Monetary Policy Committee further outlined actions set in motion by the government for the financial year 2022/23 to ensure that sufficient funds are raised to meet the budget.
“The Committee noted that the ongoing implementation of the FY2022/23 government budget, particularly the strong tax revenue collection, reflects enhanced tax administration efforts and increased economic activity,” read the statement in part.
In order to contain the rising inflation, positive economic growth registered in the country in the past year had to be utilized in order to cushion the country.
This will be achieved through optimizing local business investments in the country to deal with effects caused by foreign exchange levels as a result of an increase in dependence on imported goods such as petrol.
In an aim to alleviate the country’s spending and borrowing burden, President William Ruto ordered the National Treasury to cut sh300 billion from the 2022/23 budget.
“I have instructed Treasury to work with Ministries to find at least Ksh.300 billion in this year’s budget so that we can remove it because the market cannot sustain the kind of borrowing we are doing as government” the president said while addressing MPs and Senators
Ruto stated that this was necessary to reduce the government’ s borrowing scale from an estimate of sh900 billion in that financial year.