The National Treasury and Economic Planning Cabinet Secretary John Mbadi is backing further interest rate cuts by the central bank to increase lending to the private sector and spur job creation.
Speaking during his 50th day in office, CS Mbadi said the reduction in the benchmark rate will jumpstart the economic by increasing liquidity in the market.
“The solution to the economy is to see how to reduce the lending rates that the banks would lend to the private sector. We want the interest rates to come down so that banks can give more money to the private businesses to create more job opportunities and for people to have money in their pockets,” said CS Mbadi.
During its fifth sitting on October 8, 2024, the central bank Monetary Policy Committee (MPC) lowered the Central Bank Rate (CBR) by 75 basis points to 12pc from 12.75pc. This was the second consecutive cut of the benchmark rate this year.
Private sector credit by Saccos increased to 11pc from 9.3pc as borrowers sought alternative lending avenues to meet their expenses.
According to data by the Central Bank of Kenya (CBK) private sector credit by commercial banks declined to 1.3pc in August from 3.7pc which has been attributed to the appreciation of the shilling and the lagged effects of monetary policy tightening.
“If we adjust to the exchange rate effect then credit to the private sector would have grown by 4.3pc rather than 1.3pc. But still this is a deceleration in credit to the private sector even after taking into account the impact of the appreciation of exchange rate on loans that were denominated in foreign currency,” said Dr Thugge.
CS Mbadi further says the government has also embarked on clearance of pending bills to further increase liquidity in the market and address rising unemployment rates which the government is committed on taming.
“The single biggest challenge we have now is how do we employ our youth, our working class who come out of colleges. This will happen through the deliberate effort of injection of more liquidity into the market which we have started through the paying off of pending bills,” added CS Mbadi.
Since assuming officer on August 8, 2024, CS Mbadi says he has initiated the digitization of KRA which is in line with Kenya’s medium term economic agenda of fiscal consolidation by broadening the tax base.
“In consultation with the President we have agreed on a number of reforms at KRA including system reforms. That is having a system that can help us collect taxes more efficiently and economically,” he stated.
The reforms are expected to enhance collection from among others, VAT, personal income tax an rental income tax where KRA currently collects Ksh 17 billon against a potential of Ksh 100 billion.
In ensuring debt transparency, CS Mbadi says he has engaged the Auditor General who has commenced audit of public debt where Treasury is cooperating fully in providing documentation to ensure Kenyans have confidence in the country’s public debt records.
