KEPSA held a meeting with the Central Bank of Kenya (CBK) led by the Governor Dr. Kamau Thugge on 27^th February 2024 at the CBK Office in Nairobi. The main focus of the meeting was to discuss monetary policy proposals for a competitive business environment.

The KEPSA delegation was led by the CEO Ms Carole Kariuki and the Board Chair Mr. Jas Bedi. The delegation included KEPSA Directors; Eng. James Mwangi, Mr. Richard Harney and Mr. Ken Luusa, Mr. Victor Ogalo – KEPSA Deputy CEO, Mr. Andreas Von Polske - Retail Trade Association of Kenya, Ms. Joyce Njogu - Kenya Association of Manufacturers (KAM), Mr. Peter Gikonyo - Kenya Coffee Producers Association, Mr. Alexander Wambua - Rentco East Africa Limited and Ms. Zipporah Kuria - British American Tobacco.

In her remarks, Ms. Kariuki appreciated the ongoing efforts by CBK to ensure that the nation sustains its path toward economic recovery and prosperity. She noted that there was need to explore a model for blended financing onboarding Kenya Development Corporation and the Kenya Investment Corporation in a bid to have private sector access to affordable financing and as a measure to stop the crowding out of the Private Sector by the government.

While giving a deep dive into the proposals on monetary policy interventions, Mr. Bedi emphasized the importance of prioritizing the following drivers of competitiveness;

• Rationalization of bill of materials,
• Access to affordable financing,
• Efficient productivity laws and effective logistics models.

The KEPSA Chair emphasized that addressing the inhibiting factors in the above-mentioned drivers would ensure that the country is transformed into the desired mass exporter of local produce and products.

Mr. Bedi further proposed that the government needed to devise alternative ways to limit the level of crowding out of the private sector by issuing long-term bonds instead of short-term bonds. This would allow banks to ease up financing to offer affordable financing to the private sector, especially in the value chain sectors that the government had set out in their development plan.

Among other issues that were raised in the plenary included the increased interest rate leading to the rising default rate of loans by manufacturers and reducing overall investment appetite; Anti-Money laundering measures put out by CBK; and the reliability and sustainability of the payment platforms to de-risk the overreliance on one payment platform and ensure small businesses maintain the ability to pay.

It is estimated that the economic growth of the global and Sub-Saharan African region is average of 2.9 percent and 3.3 percent respectively. However, Dr. Thugge noted some optimism highlighting that the Kenyan economy is projected to expand by 5.5 percent in 2024. The CBK Governor painted a picture of the significance of the services industry, noting that recent statistics indicated that the trade in services, especially agriculture services, had been driving the economy. Additionally, he demonstrated that the forex market is determined by market forces and not controlled by policies. He attributed the recent fluctuations in the Kenyan shillings to the dollar to the interest rate differential set by the US Federal government, among other factors.

The Governor acknowledged the competitiveness drivers that were highlighted as by the KEPSA Chairperson and as captured in the KEPSA Strategy. Other factors that were highlighted as key priority areas to drive up exports and stimulate the economy toward sustained recovery and growth were;

• Attracting Foreign Direct Investments
• Ensuring affordable financing by curbing the crowding out effect of the private sector
• Deliberate fiscal consolidation efforts and policy efforts to support exporters and reduce the balance of payments.

The CBK Deputy Governor, Dr. Susan Koech, also present in the meeting, appraised members on the Dhow CSD portal that was supporting Kenyans across the divide to invest in government papers.  

In conclusion, the meeting agreed to meet bi-annually to discuss the macroeconomic outlook with the private sector perspectives.