Kenya’s central bank cut its benchmark lending rate again on Wednesday, to 7.0% from 7.25%, saying measures to tackle the impact of the coronavirus were having an effect but it needed to do more due to the adverse economic outlook.
Kenya has confirmed 384 cases and 14 deaths, and its tourism and agriculture exports businesses have suffered from global shutdowns aimed at curbing the virus’ spread.
It has imposed a daily curfew, suspended international passenger travel and restricted movement in and out of the regions most affected by the virus, including the capital Nairobi.
“In light of the continuing adverse economic outlook, the (monetary policy committee) decided to augment its accommodative monetary policy stance,” the central bank said in a statement.
The bank forecast economic growth of 2.3% this year, down from its March forecast of 3.4%, and from its estimate of 6.2% earlier this year.
“Taking into account the recent growth projections for our trading partners, Kenya’s GDP growth in 2020 is forecast to decline sharply,” the bank said.
At its meeting in March, the bank cut the lending rate by 100 basis points, and also lowered the cash reserve ratio for commercial banks to 4.25% from 5.25%.
It said it stood ready to take any additional measures as necessary and that it would reconvene within a month.
The bank said 43.5% of the funds — 35.2 billion Kenyan shillings ($328.48 million) — released into the banking system had already been used, with most going to the tourism, real estate, trade and agriculture sectors.
It also said that as a result of emergency measures it announced in mid-March, loans worth 81.7 billion Kenyan shillings ($762.41 million) had been restructured mainly in tourism, restaurants and hotels, real estate, building and construction and trade.
The bank said there was a need to set up a mechanism to cushion small and medium businesses.
It said it forecast the current account deficit to be 5.8% of gross domestic product this year, from its projection of 4.0 to 4.6% in March, and from 5.8% in 2019 and 2018.
The bank said a projected fall in remittances was going to be more than offset by lower oil imports.
Finance Minister Ukur Yatani said on Tuesday 2020 economic growth would decline to 2.5% but may fall to 1.8%, compared with 5.4% in 2019, because of the coronavirus outbreak.
The Finance Ministry had forecast growth of 6.1% for this year before the health crisis swept around the globe.
The International Monetary Fund and World Bank have also slashed Kenya’s 2020 economic growth forecasts.
The government has announced a series of tax cuts for individuals and companies and allowed lenders to restructure loans for individuals and firms who might fall into distress.