IMF wants state to abolish the law on capping interest saying the law signed by President Kenyatta will weigh down economic growth

IMF wants state to abolish the law on capping interest saying the law signed by President Kenyatta will weigh down economic growth

The International Monetary Fund (IMF) has urged Kenya’s government to abolish the new law which capped interest rates at 14.5 %.

The international lender says the law, which was signed by President Uhuru Kenyatta in August 2016 is likely to weigh down the country’s economic growth given that it has significantly reduced access to credit for SMEs, which account for 30 % of the jobs in Kenya, according to the latest government statistics.

IMF Deputy Managing Director and Acting Chair, Min Zhu says abolishing the interest capping rate law would help mitigate the impact of “potential exogenous shocks thus enhancing a robust growth performance.

“In this context, the new precautionary arrangements would provide a policy anchor for continued macroeconomic and institutional reform, and would help mitigate the impact of potential exogenous shocks if they were to materialize,” said Mr Zhu, who was referring to a $1.5 billion (Sh156 billion) precautionary loan that the IMF approved for Kenya in 2016.

He added that Kenya’s recent growth performance remains robust and the country’s outlook is positive.

“Despite positive policy steps undertaken under the current Fund-supported program, the economy remains vulnerable to shocks, reflecting less favourable global financial market conditions, as well as continued security threats and extreme weather events,” he said.

IMF wants the government to scrap law saying it will deteriorate the economy.

Mr Zhu said authorities are taking actions to preserve financial stability, including steps to strengthen micro and macro prudential stress testing and the capital adequacy assessment framework and develop a legal and operational crisis management system.

“Continued improvement in the quality of macroeconomic statistics and strengthening the business climate will be key to promoting transparency and evidence-based policy making, and supporting inclusive growth,” Zhu said.

The Kenya Private Sector Alliance (KEPSA) had earlier criticised President Uhuru Kenyatta’s move to ascent the rate capping law, saying it would bar a majority of SMEs from accessing loans.

The banking sector has seen thousands of jobs lost with some lenders reporting a decrease in revenue since the law came into effect.

Previous Ten shilling stake earns Mombasa gamer sh 900,000
Next Taxpayers to suffer more as government secretly plans to borrow Sh83.2 billion to repay existing loans

You might also like

Business 0 Comments

Business news highlights

Accountants Association reveals ‘magnificent seven’ attributes vital for success in modern business An optimum blend of skills, experience and intelligence is now needed by professional accountants, an in-depth global research

Business 0 Comments

General Electric trains social entrepreneurs to address maternal and child health in Sub-Sahara Africa

  GE in partnership with Santa Clara University trains social entrepreneurs to improve maternal health across Africa The move comes at a time when the country’s health sector is facing

Business 0 Comments

KQ customers to purchase air tickets on Equitel platform

Equitel users can now buy Kenya Airways (KQ) air tickets through the platform’s EazzyPay service. Equity Group Chief Executive Officer Dr. James Mwangi said that the bank is actively signing

0 Comments

No Comments Yet!

You can be first to comment this post!

Leave a Reply