Kenya's economy is expected to expand by 5.8 percent in 2023; a slower pace than the previously forecast 6.1 percent because of lower growth in the agricultural sector, Central Bank Governor Patrick Njoroge said on Thursday.
Kenya like other East African States 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 as well as heavy public debt load.
"We scaled down agricultural growth which has brought down our projection for overall growth in 2023," Njoroge said in a news conference.
Last week, Kenya’s President William Ruto said the country’s government was working with the Central Bank of Kenya (CBK) to revive the interbank foreign exchange market which has been inactive in recent years because of what traders say was an aggressive policy.
CBK 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 Kenyan 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 Kenya’s 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 Kenyan shilling exchange rate.
"Yes, the journey has started and already you can see a positive outcome in terms of the reactivation of the interbank market," he said.
“CBK’s foreign exchange reserves which stand at $6.4 billion (KSh846.72 billion) and equivalent to 3.6 months of import cover, is expected to rise by $1.4 billion (KSh185.22 billion) by the end of April with further assistance from IMF by the end of June,” Njoroge said.
The bank on Wednesday raised its benchmark lending rate to 9.50 percent from 8.75 percent previously and said there was room for further tightening of monetary policy in anticipation of higher inflation.
Kenya’s 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 percent in 2022.