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Kenya’s acting finmin says to tackle rates, volatile shilling

By on January 29, 2012

Kenya’s acting Finance Minister Robinson Githae has said he plans to tackle high lending rates, a volatile local currency and a rising import bill, the Daily Nation reported on Saturday.

Githae, a lawyer and minister for metropolitan development, was named to the finance portfolio after Uhuru Kenyatta quit the post on Thursday to face charges over the deadly post-election violence at the war crimes court in The Hague.

Githae’s statements and policies will be watched closely because east Africa’s largest economy is battling double-digit inflation, a weak currency, slowing growth and a deteriorating balance of payments position.

Githae said his first task will be to address a clamour from legislators for a law to cap interest rates.

An aggressive tightening cycle since October last year to stabilise the exchange rate and fight inflation, now at 18.9 percent, has given rise to concerns about what will happen to the quality of credit.

Kenya’s benchmark interest rate is at 18 percent.

“We have to sit down and reach an agreeable and amicable solution. The aim is to help the borrowers, not to kill the banks,” reported Kenya’s leading newspaper.

Parliament will debate a motion to set the minimum deposit rate at 70 percent of the central bank rate and cap lending rates at no more than 400 basis points above the rate.

The International Monetary Fund opposes the proposed cap.

Githae told Reuters on Friday he would formally address the media on Monday about his new role.

Githae also said he would focus on reducing the import bill to help ease pressure on the shilling.

“We must reduce the import bill. Why, for example, should we import eggs, oranges, sausages, maize, rice, sugar and wheat?… In my view, the only thing we should be importing is oil,” said the newspaper in remarks attributed to Githae.

The volatile shilling hit a record low of 107 hit on October 11, but has since recovered, helped by the central bank’s tightening stance following remarks by Kenyatta at the time that he would act decisively to stem the currency’s volatility.

Kenyatta quit the finance docket after being indicted by the International Criminal Court (ICC) for crimes against humanity during violence that followed the disputed election of 2007, where he is accused of directing violence.


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