Destination Point Kenya

The sector’s performance was characterised by slowed growth in money supply, increased net foreign assets and a slump in the growth of domestic credit. Credit to Central Government dropped by 4 per cent while private sector received 9.1 per cent more credit in 2008.

The banking sub-sector, recorded a much slower growth and higher non-performing loan portfolios. The Central Bank increased the start-up capital requirement of commercial banks, a measure that saw a number of mergers of smaller banks during the year.

On average the Shilling depreciated during the year against major international currencies. This was more pronounced in the third quarter dropping from a mean rate of Kshs. 63 to the US$ to Kshs. 75 to the US$. The depreciation was partly attributable to the decline in foreign exchange inflow from coffee and tea. Towards the end of the year , it appreciated slightly against international currencies in view of the positive signals of aid resumption by the International Monetary Fund and the World Bank.

In response to the upward movement of the Treasury bill discount rate, commercial banks adjusted their base lending rates upwards. Domestic interest rates which had fallen to below 10 per cent on the benchmark 91-dais Treasury Bill earlier in the year started to rise and doubled to 20 per cent by the end of the year .The overall average inflation rate recorded 3.5 per cent compared to 6.6 per cent in 2007. The weakening of the Shilling was translated into increases in prices especially the petroleum products. The upward revision of the petroleum levy was also a contributory factor to the upward adjustment of petroleum product prices. The sector’s performance slowed down from 2.3 per cent in 1998 to 2.0 in 2008.