The Central Bank of Kenya (CBK) says the fresh coronavirus containment measures are “selective” with no substantial impact on the economy.
“However, we do not know the duration,” said Dr Patrick Njoroge, CBK Governor at a media briefing post MPC meeting held Monday maintaining the CBR at 7.0% through Q2.
“We need to give it time to understand. Things are still unclear on what exactly the impact is,” Dr Njoroge said adding that “There are a lot of areas that have been untouched by the containment measures.”
On Friday, President Uhuru Kenyatta restricted travel in the capital Nairobi and the counties of Kajiado, Machakos, Kiambu and Nakuru to contain the spread of Coronavirus.
Monday, the MPC said the package of policy measures implemented over the last year have protected the economy from substantial decline and supported the most vulnerable citizens.
According to the MPC’s four Private Sector Market Perception, surveys revealed optimism on economic growth prospects in 2021, largely attributed to the rollout of COVID-19 vaccines, the stable economic environment, increased Government spending on infrastructure, private sector credit growth, and the COVID-19 mitigation measures.
“Nevertheless, respondents were concerned about continued uncertainties over the pandemic, and the increased cost of inputs,” the MPC said.
On the other hand, Dr Njoroge hinted that loan repayment reliefs could be reintroduced if the economic situation escalates.
“If the things turn out that additional measures are needed because things have really worsened, then obviously the MPC (Monetary Policy Committee) and all the other policymakers stand ready to deal with that. But you have to appreciate that it comes at a cost, and so you have to balance it against the cost of those measures. And the cost here potentially is to the (bank) depositors and we are conscious of that. It’s important to safeguard that, and that’s why, in a sense, there’s no such a thing as free lunch,” he disclosed.
More space to cut rates
On whether there was more space to cut interest rates from 7.00 per cent, Dr Njoroge said “There is definitely space to cut interest rates”, but it should not be solely anchored on interests rates as there are other measures that are needed.
“The measures that will have the most impact are not the sort of demand management measures. It’s actually the structural measures,” he added.
“Let us be clear with where the constraints,” said Dr Njoroge citing the structural challenges with the flower sector that has been in need of more cargo space.
In the survey, all respondent flower farms continued to be operational, with export orders recovering too, and employment surpassing, pre-COVID-19 levels.