This archive report was first published on 14 July 2020.
Kenya's interbank rate has hit a year low of 1.68 per cent, indicating high liquidity in the economy despite the adverse effects of the Covid-19 pandemic.
According to the Central Bank of Kenya (CBK), the interbank rate has not been this low since April 8, 2019, when lenders paid an average of 1.67 per cent for every loan they took from their peers.
CBK's weekly bulletin noted that the money market was liquid during the week ending July 9, supported by government payments that offset tax receipts.
Commercial banks' excess reserves stood at Sh29.8 billion in relation to the 4.25 per cent cash reserve ratio (CRR), CBK said.
The financial regulator also noted that open market operations remained active, and many firms have been able to save money after President Uhuru Kenyatta directed that some tax heads such as VAT and Corporate Income Tax be slashed.
CBK's Monetary Policy Committee has considerably reduced its benchmark lending rate, contributing to increased liquidity in the economy.
As the financial year came to a close, the interbank money market tightened to six per cent, but this was still much lower than a high of 30 per cent seen in 2011.
Analysts reckon that much of the money invested in government securities is from the State stimulus package, which has involved settling part of the pending bills and value-added tax (VAT) refunds.
