Njoroge: CBK has 'plenty of firepower'

The central bank governor Patrick Njoroge said on Thursday that policymakers still had plenty of firepower left to limit the damage to the country’s economy from the coronavirus crisis.

Policymakers cut the benchmark lending rate by a total of 125 basis points at the onset of the crisis, lowered cash reserves for commercial banks and allowed them to restructure distressed loans.

“We have plenty of firepower ... We still have plenty of those (tools). We are willing to use them as needed, if needed, but at this moment the MPC judged that it is better to wait,” Patrick Njoroge told an online news conference, referring to the bank’s decision to hold rates on Wednesday.

Njoroge said good weather had boosted production volumes and exports of key crops like tea.

A rebound in exports of flowers, as well as projected higher production of other crops like maize and higher production of cement, promised a quicker economic recovery than earlier anticipated, he said.

“All these point to strong growth in 2020 despite COVID,” he said, adding that the bank’s economic growth forecast would be released soon.

He lowered the current account deficit forecast for this year to 5.1 per cent of GDP from the previous forecast of 5.8 per cent.

He cited a better-than-expected performance in hard cash sent by Kenyans living abroad, known as remittances, and the rebound in farm exports.

The central bank now expects remittances to grow by 1 per cent this year, an improvement of its initial forecast of a drop of 12.3 per cent due to COVID-19.

The central bank was not concerned by the recent depreciation of the shilling, which is down 6.3 per cent against the dollar this year to date.

“We still think these numbers (shilling’s drop) are appropriate given the circumstances,” he said.

The bank’s Monetary Policy Committee has gone back to meeting to review rates every two months, it said, after it started meeting every month in March because of the coronavirus crisis.