National treasury building in Nairobi/Photo/courtesy
NAIROBI, DEC 14 – The ministry of Treasury has said that the increased interest rate is a means of stabilizing economy. The ministry seeks to reduce inflation through monetary policy.
This means the government is trying to reduce the amount of money in circulation in order to increase the value of its currency which has dropped drastically against the dollar. Monetary Policy Committee (MPC) on December 5th decided to raise CBK interest rate from 10.5% TO 12.5%
This move is one of the measures that states takes in order to curb inflation. One of the measures to reduce money in circulation is to reduce government expenditure and increase interest rate thus discouraging borrowers from getting their hand to more money. This, will eventually reduce the money that the citizens have and by design, the currency’s value increases or at worst remain at the current state.
“The work that has been done by Central Bank to increase exchange rate means that the exchange rate will be stable and you have seen it stabilizing. We expect more of the dollar inflows coming in now to further stabilize the shilling. From where I sit I see next year from January, February, March to be a time when we will not be struggling with a lot of liquidity and by the end of the year I expect that we will have normalcy,” Dr Chris Kiptoo, PS National Treasury said.
Treasury Cabinet Secretary Njuguna Ndung’u is hopeful that the country will recover and overcome external shocks affecting Kenya’s economy. “We do believe that there is a chance that we can still recover from all these persistent shocks. We still believe that there is risk to the outlook that we have but we can overcome,” CS Ndung’u said.
