President William Ruto will borrow less from the local banks by Ksh270 billion in this financial year in a move aimed at lowering and stabilising the interest rate of loans offered to Kenyans.
According to the Central Bank of Kenya, the Treasury has reduced its target for domestic borrowing from Ksh586.5 billion to Ksh316 billion.
The move to reduce domestic borrowing will see banks lend more to Kenyans at lower rates. Increased borrowing in the domestic market over the past years has seen banks ditch private lending which is considered risky.
“We believe that with that reduced domestic borrowing, we will see a reduction in the pressure on interest rates," CBK governor Kamau Thugge stated
Thugge added that the move was actualised following the move to cut the deficit of Ksh3.6 trillion budget presented in parliament in June.
"The FY2022/23 Government Budget operations resulted in a lower budget deficit of 5.3 per cent of GDP from 6.2 per cent of GDP in FY2021/22.
"The ongoing implementation of the FY2023/24 Government Budget continues to reinforce fiscal consolidation. A narrower budget deficit of 4.3 per cent of GDP is expected in FY2023/24" he stated.
Kenyans will only enjoy lower interest rates if the government follows through with the plan.
However, the new move will see the current administration borrowing more from external financing institutions such as the International Monetary Fund (IMF) and foreign governments.
CBK explained that more eternal borrowing would also be beneficial to the economy and bolster the foreign reserves a move that could see importers have enough dollars for business.
Already the government has received a loan worth Ksh142 billion from IMF with additional funding expected from other banks in the year.
According to a report published by the Treasury in July, Ruto's administration will borrow Ksh607 billion externally.