Kenya’s economy to grow at a slow rate this year – says IMF official

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NAIROBI – Kenya’s economic growth rate will slow in 2017, from about 6 per cent last year, due to sluggish credit growth and as investors take a wait-and-see attitude before a presidential election in August, a senior IMF official said yesterday.

Armando Morales, the International Monetary Fund’s representative in Kenya, said growth is likely to remain within the 5-6 per cent range of the past five years, despite the slowdown.

“We expect a deceleration of growth for several reasons, but I think the most important reason we are considering is the potential impact of the interest rate cap on credit growth,” he told Reuters in an interview.

The government capped commercial lending rates at 400 basis points above the central bank’s lending rate last September, hurting already stressed private sector credit growth.

After September, banks’ lending grew by just 5 per cent year-on-year, down from 17.8 per cent in December 2015. Stricter sector supervision by the central bank and the closure of two banks had cut credit growth before the rate cap came in.

A disputed election result in 2007 led to violence that killed around 1,250 people. Odinga challenged the outcome of the 2013 election but the result was upheld by the country’s Supreme Court.