Central Bank move to contain lending rate laudable

The central bank has decided to keep its key lending rate unchanged - at a record low of 6 percent - to maintain the pace at which commercial banks lend to the private sector to support economic development.

The central bank has decided to keep its key lending rate unchanged - at a record low of 6 percent - to maintain the pace at which commercial banks lend to the private sector to support economic development.

The key repo rate—the interest the central bank charges on loans to commercial banks—is often used to determine the interest rates charged by commercial banks to individual customers and businesses.

The decision by the central bank, which is expected to translate into affordable borrowing rates, reaffirms the government’s commitment to pro-growth and credit expansion to the private sector.  

This is good news for the private sector, which was dogged by credit uncertainty and banking instability throughout 2009 and the first half of 2010.

While the Ministry of Finance and Economic Planning forecasts economic growth to reach 7 percent this year, the central bank intends to achieve a significant increase in growth of credit to the private sector to 19.7 percent from 11.1 percent in 2010.

The low interest rates are, therefore, essential to bring about the much needed liquidity into the economy, to boost growth and wealth creation.

While the central bank expects relatively high inflation by the end of this year, it has, so far, managed to effectively contain it in single digits with the appropriate monetary policy. 

Central bank Inflation is expected to reach 6 percent by the end of this year. In maintaining low inflation and interest rates, the bank will be able to consolidate the gain made in the economy and prepare for long term growth.

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