Kenya’s president rejects finance bill which kept rate caps

Uhuru Kenyatta

NAIROBI (Reuters) – Kenya’s President Uhuru Kenyatta has rejected the 2019/20 budget demanding that lawmakers remove a cap on commercial lending rates, a senior lawmaker and a local daily said on Thursday.

In 2016, the government limited rates banks can charge customers to four percentage points above the central bank’s benchmark – currently 9% – saying they were concerned about high rates.

In late September, lawmakers rejected a June request by the Treasury to remove the caps, saying lenders had not proven they could be trusted to lower rates without pressure.

The Business Daily newspaper reported that Kenyatta had rejected the budget – known as the Finance Bill, over the rate cap, adding that the formal reasons would be sent to parliament later on Thursday.

Parliament will meet in the next two weeks to consider the president’s recommendations on the bill, Adan Duale, parliament’s majority leader told Reuters.

“To overturn the president’s position, two thirds of members of the house must be present and reject,” Duale said.

The finance ministry says the cap has squeezed credit to the private sector as banks cut lending to customers deemed risky, including small and medium-sized businesses.

The central bank says the cap had probably cut 0.4% from 2017 economic growth.