This archive report was first published on 25 June 2020.
On June 25, 2020, the Central Bank of Kenya (CBK) announced that it would retain its key lending rate at 7.0 percent for the second time in a row. This decision was made by the Monetary Policy Committee (MPC) in a bid to continue providing relief to borrowers affected by the COVID-19 pandemic.
According to the CBK, the package of policy measures adopted since March had been having the intended effect on the economy. The MPC noted that the measures would be augmented by the announced fiscal measures, which aimed to stimulate the economy and cushion vulnerable citizens and businesses from the adverse effects of COVID-19.
As part of the relief measures, the CBK had extended the repayment period of personal/household loans amounting to Sh199.1 billion by the end of May. Additionally, a total of Sh480.6 billion had been restructured mainly to trade, real estate, tourism, transport and communication, and manufacturing sectors.
The banking sector remained stable and resilient, with strong liquidity and capital adequacy ratios. The ratio of gross non-performing loans (NPLs) to gross loans stood at 13.0 percent in May, compared to 13.1 percent in April.
Exports of goods improved by 4.1 percent in the period January to May 2020, mainly driven by tea, horticulture, and re-exports. The volume of tea exports increased by 23.5 percent, while receipts from tea and horticulture exports increased by 15.2 percent and 22.7 percent, respectively, in May 2020 compared to May 2019.
Remittances recovered in May to USD258.2 million from USD208.2 million in April. However, services exports were subdued due to the adverse impact of the pandemic on tourism and air transport services.
Respondents to the MPC Private Sector Market Perception Survey conducted in June 2020, expected increased economic activity in the next two months. The survey indicated improved optimism, attributed to the supportive measures rolled out by the Government including the Economic Stimulus Programme, the commitment by the Government to payment of pending bills, improved weather conditions, and the commencement of reopening of some of the key trading partners’ economies.
