The Central Bank of Kenya (CBK) now says it is time the country renegotiated its debts to offer relief on repayments.
Speaking during the post Monetary Policy Committee meeting that once again held the benchmark lending rate at 9%, Governor Patrick Njoroge also warned of external shocks that may affect Kenya’s economic outlook.
The Central Bank projects a 6.3% growth for this year, but with the country’s public debt hitting highs of almost Ksh.5 trillion, CBK remains weary of the long-term effects going forward in light of the expected external shocks.
“There is no ideal time that you can say the markets will be quiet at a particular time, but the points are regardless of when you borrow, you need to present your best case forward,” Patrick Njoroge- Governor CBK.
Njoroge further prescribes renegotiation of current loans if Kenya is to handle the debt headache with relative calmness.
“There is scope for a refinancing of your debts or reorganization of your debt portfolio…you could potentially pay your more expensive debt and replace it with cheaper debt, only that the current cost of that debt is removed,” said Njoroge.
Economies across the globe preparing for these shocks but Kenya’s 2019 economic outlook forecasts still remain optimistic.
“US and china will only worsen the trade environment in the world…we may not be direct recipients of those tariffs, but in the end nobly will benefit….we should be supporters of a free trade regime,” said Njoroge.
The Central Bank also says reserves will be key to cushion the economy from external jolts.
“I think one of the ways of dealing with volatility is by having more buffers, policy buffers…. Like reserves, so that you can jump in either direction, you don’t want to be caught in a corner,”
This coupled with another crisis in Venezuela which has seen the United States call for tough oil sanctions against the South American nation.
“US and Venezuela issues, the main impact of this will be through price of oil. The entire market will have to adjust with uncertainties that are there. No man is an island,” noted Njoroge.