The Monetary Policy Committee in a meeting held on Wednesday lowered the Central Bank Rate (CBR) to 7 percent from the initial 7.25 percent as the deadly Coronavirus continues to sweep across the country.
“The Committee noted that the policy measures adopted in March were having an intended effect on the economy and were still being transmitted,” said the MPC in a statement from the Central Bank of Kenya.
According to the Committee, the decision to further lower the Central Bank Rate was reached “in line with the continuing adverse economic outlook and the need to have an accommodative monetary policy stance.”
The global economic outlook in the year 2020 remains highly uncertain with the latest growth projections indicating a sharp contraction.
The World Bank Group, in its Kenya Economic Update report, projected that the global economy is set to go into recession this year as a result of hits from Covid-19.
Across the world, severe interruption across all activities, restrictions of movement of people have led to a sharp increase in unemployment among the people with no hope of solutions ever coming soon.
According to MPC, the policy measures adopted in March when it lowered the Central Bank Rate (CBR) and the Cash Reserve Ration (CRR) have had a positive effect on the economy.
43.5 percent of the funds released into the banking system last month have already been utilized with the tourism sector, real estate, trade, and agriculture sectors being the real beneficiaries.
In 2019, Kenya’s economy grew by 5.4 percent. However, with the effects of Covid-19, the economy is projected to contract sharply to 2.3 percent with analysts saying that there is no hope of it ever turning around.
When Covid-19 hit the country, businesses such as bars, clubs, hotels, and airlines were shut down leading to mass firing of millions of employees with numbers placing them at least 8,000,000.