Monetary policy committee observes that Kenyan banking sector is resilient

Kenya’s banking sector has shown remarkable resilience amid various uncertainties according to the Monetary Policy Committee (MPC). Banks have continued to make adequate provisions for non-performing loans (NPLs), and the ratio of gross NPLs to gross loans increased to 14.6 percent in April 2023 from 14.0 percent in February. The banking sector maintained strong liquidity and capital adequacy ratios.
Growth in private sector credit also picked up standing at 13.2 percent in April 2023 compared to 11.7 percent in February.

The Kenyan economy remained resilient in 2022 despite the subdued agricultural performance. According to the recently released Economic Survey 2023. Real GDP grew by 4.8 percent in 2022, mainly driven by the services sector, particularly transport and storage, financial and insurance, information and communication, and accommodation and food services.

The economy is expected to continue to strengthen in 2023, supported by the resilient services sector and expected recovery in agriculture.

The MPC also noted the ongoing implementation of the Financial Year 2022/23 (FY2022/23) government budget, particularly the performance in tax revenue collection and the proposed FY2023/24 Budget.
Furthermore, the disbursement of the recently approved World Bank Development Policy Operation (DPO) and other external inflows are expected to improve liquidity conditions in the economy. The impact of the further tightening of monetary policy in March 2023 to anchor inflationary expectations was still transmitting in the economy.

The recently announced Government measures to allow duty-free imports on specific food items like sugar are expected to moderate prices and ease domestic inflationary pressures. The MPC decided to retain the Central Bank Rate (CBR) at 9.50 percent given the prevailing economic conditions.

The Committee will closely monitor the impact of the policy measures as well as developments in the global and domestic economy, and stands ready to take additional measures if necessary. The Committee will meet again in July 2023 but remains ready to reconvene earlier if necessary.