Kenya central bank trims 2023 GDP growth forecast to 5.8%

Kenya's economy is expected to expand by 5.8% in 2023, a slower pace than the previously forecast 6.1% because of lower growth in the agricultural sector, Central Bank Governor Patrick Njoroge said on Thursday.

Kenya's economy is expected to expand by 5.8% in 2023, a slower pace than the previously forecast 6.1% because of lower growth in the agricultural sector, Central Bank Governor Patrick Njoroge said on Thursday. Kenya, like others in the region, is emerging from the worst drought in four decades. It has also seen a jump in the prices of basic commodities and is suffering from the effects of a weaker currency and heavy public debt load.

"We scaled down agricultural growth which has brought down our projection for overall growth in 2023," Njoroge told a news conference. Last week, President William Ruto said the government was working with the central bank to revive the interbank foreign exchange market, which has been inactive in recent years because of what traders say was aggressive policing by the central bank.

The central bank has repeatedly denied undue interference in the market, saying the regulator was performing its role of enforcing discipline. It says it has no preferred rate for the shilling and only intervenes to reduce volatility. The lack of a vibrant interbank foreign exchange market has been blamed in part for an acute shortage of hard currency that has forced the government to seek longer credit periods for essential imports such as petrol.

Njoroge said the return of interbank trade over the past two weeks had smoothed out volatility in the shilling exchange rate. "So, yes, the journey has started and already you can see a positive outcome in terms of the ... reactivation of the interbank market," he said.

The bank said its foreign exchange reserves, which stand at $6.4 billion, equivalent to 3.6 months of import cover, were expect to rise by $1.4 billion by the end of April, with further assistance from the IMF by the end of June, Njoroge said. On Wednesday, the central bank raised its benchmark lending rate to 9.50% from 8.75% previously and said there was room for further tightening of monetary policy in anticipation of higher inflation.

Opposition leader Raila Odinga has used inflation as a reason for calling bi-weekly anti-government protests. The Kenyan economy grew by an estimated 5.6% in 2022.

 

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