At least 75 of small and medium businesses risks closure by end of June due to lack of funds as coronavirus bites, Central Bank of Kenya (CBK) has said.
This translates to close to eight businesses out of every 10, a situation the CBJ governor describes as dire and required quick interventions for a sector that accounts for 70 percent of new jobs in the country.
''Those businesses are on rocks and would be in a critical state by the end of June. They are in need of urgent rescue plan,’’ Njoroge told a post-Monetary Policy Committee (MPC) briefing,
He said any intervention needs to go beyond finance, into ‘finance plus’, including linkages to other markets.
Last week, President Uhuru Kenyatta announced Sh3 billion SME credit guarantee scheme as part of his economic stimulus package to resuscitate the economy which is pinned down by the effects of coronavirus.
The President said this would provide affordable credit to SMEs but failed to elaborate on how the seed capital will be distributed.
On Thursday, CBK governor hinted that Treasury was working on a formula and other details to be announced soon.
Uhuru also said SMEs will benefit from Sh10 billion set aside to fast-track payment of outstanding Value Added Tax (VAT) refunds and other pending payments.
In addition, CBK said the lowering of the Cash Reserve Ratio (CRR) in March which saw Sh35.2 billion released to the banking sector continues to be transmitted through the economy.
The banking regulator said 82.6 per cent of the funds (or Sh29.1 billion) has been channeled to support lending, especially to the tourism, transport and communication, real estate, trade and agriculture sectors.
Latest data from the Kenya Federation of Employers shows that at least 342,300 jobs have been lost in the last two months, with companies likely to continue laying off if the coronavirus lockdown persists.
President Uhuru Kenyatta had on other hand warned that over half a million Kenyans could lose their jobs in the next six months due to the Covid-19 pandemic
According to CBK, the country’s growth is expected to worsen in the second quarter of the year (April-June), with the imposition of more stringent travel and transport containment measures, particularly in transport and storage, trade, and accommodation and restaurants.
‘’As a result, real GDP growth in 2020 could slow to about 2.3 per cent from 5.4 per cent in 2019. Overall, inflation is expected to remain within the target range in the near term,’’ Njoroge said.
CBK’s growth projection is however 80 basis points above that of both World Bank and IMF which have projected the country’s GDP to expand by 1.5 per cent from an earlier projection of 5.6 per cent.
On Wednesday, the MPC maintained the base lending rate at seven per cent, saying that the current accommodative stance remained appropriate.
The committee has cut its main interest rate by a total of 125 basis points over two meetings to support the economy since the first case of the new coronavirus was reported in mid-March.
“The policy measures adopted in March and April were having the intended effect on the economy, and are still being transmitted,” the committee said in a statement.
