Home Current News Kenya’s President Rejected Rate-Cap Bill, Central Bank Head Says

Kenya’s President Rejected Rate-Cap Bill, Central Bank Head Says

81

Kenya’s President Rejected Rate-Cap Bill, Central Bank Head Says(Bloomberg) — Kenya’s president rejected a bill that seeks to retain caps on interest rates, paving the way for the removal of a law that’s been choking the economy, central bank Governor Patrick Njoroge said.President Uhuru Kenyatta sent the Finance Bill back to parliament and won’t sign it as long at it provides for interest-rate caps, Njoroge said in an interview Wednesday in Washington, where he’s attending the annual meetings of the International Monetary Fund and World Bank. Parliament could agree with the president and amend the bill to remove the rate caps, or could decide to push the bill through, which would require two-thirds support in the house.“It’s very unlikely that they will come up with two-thirds of votes, so we believe that we are in a position, very soon, of overturning the interest-rate caps,” Njoroge said. “The president says remove it.”Lawmakers first approved the controversial law, which restricts what commercial banks can charge for loans to 4 percentage points above the central bank’s benchmark interest rate, in 2016 to fulfill Kenyatta’s campaign pledge to improve lending terms for borrowers. Instead of boosting borrowing, private-sector credit growth slowed as banks preferred lending to the government. Njoroge and the central bank have been vocal critics of the rate caps, saying they complicate the transmission of monetary policy.The Nairobi High Court annulled the law in March but suspended enforcement of the ruling for a year so lawmakers could review the legislation. The Treasury recommended scrapping the law, but a lawmaker then proposed changes that clarify the extent to which banks can price loans. That’s what the president wants removed, Njoroge said.“The economy is being choked by interest-rate caps,” he said. “If you want small and medium enterprises to continue strengthening and employ people, you have to let go of these interest-rate caps.”Lenders in Kenya have been wrestling with the uncertainty about how much they can charge for loans. Njoroge said he’s had conversations with banks and they understand “they can not take advantage” if rate caps are removed.“They can not go back to the old way of behaving. They have to keep up with the times and be more customer-centric,” he said.–With assistance from Adelaide Changole and David Herbling.To contact the reporter on this story: Rene Vollgraaff in Johannesburg at [email protected] contact the editors responsible for this story: Benjamin Harvey at [email protected], Michael S. Arnold, Nasreen SeriaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

Source: yahoo.com/news