Interest rates drop by 0.45 per cent

Interest rates drop by 0.45 per cent

Interest rates for the period ended November 2020 dropped, signalling stability in the lending market over the period.

According to the Ministry of Finance, both the shilling and foreign currency-denominated lending rates slightly reduced during November, amid a speculative electioneering period that experts had said would disrupt the money markets.

Data from the Ministry of Finance for the period ended December 2020, indicate that interest rates on the shilling denominated loans reduced to 18.85 per cent from 19.3 per cent in October while the rates for foreign currency denominated loans reduced to 5.29 per cent from 6.29 per cent.

“This was partly attributed to the continued accommodative monetary policy stance,” said the Ministry of Finance in a report released on Monday.
During the period, the report noted, the shilling appreciated by 1.2 per cent against the dollar trading at a mid-rate of Shs3,710.68 in December compared to Shs3,719.92 in November 2020.

The appreciation was attributed to steady inflows from remittances and offshore investment and inflows into the domestic securities market.
On the other hand, the shilling weakened against the Pound Sterling (by 0.5 per cent) and Euro (by 1.6 per cent).

During the period, the stock of outstanding private sector credit grew by 0.8 per cent to Shs17.46 trillion in November from Shs17.31 trillion in October 2020, due to a reduction in lending rates and a drop in non-performing loans.

During November, at least Shs679.6b worth of credit was approved for disbursement to the private sector, which represented an approval rate of 48 per cent.

However, this was lower than the approval rate of 56 per cent registered in October 2020. The largest share of approved loans, the report notes, went to personal and households (25.4 per cent), trade (23.9 per cent) and agriculture (14.2 per cent).

The Purchase Managers Index, a key measure of economic performance, fell for the second month in December to 51.2 from 53.9 in November due to decrease in employment and lengthened supplier delivery time due to material shortages.

However, the report noted the reduction of the Purchase Managers Index remained above the 50 threshold, signalling an improvement in overall business conditions.

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