PRESIDENT Uhuru Kenyatta yesterday hinted the Central Bank would early next year be empowered to have tighter controls on price of goods and services including interest rates.
Without being specific, the President said the government would introduce a new law to strengthen the bank's institutional framework to enable it deliver on its core mandate of price and financial stability better.
He said price and financial services stability was a prerequisite for sustainable double-digit economic growth and development under government's Transformative Development Strategy over the next fours.
The strategy aims to better the business environment through enhanced investment in transport, logistics and other infrastructural projects including energy to ease operational costs for the private sector.
"...We must put in place and implement policy measures to lock in and sustain a high and inclusive growth that expands economic opportunities, generates jobs and reduces poverty," Uhuru said. "The Central bank...is expected to play a leading role in ensuring a conducive business environment including a low and stable price regime."
His Deputy William Ruto was nonetheless candid in expressing his dissatisfaction with an undisclosed explanation by the CBK on why the interest spread--the difference between lending and saving rates-- remains above 10 per cent.
Ruto said the rate was prohibitive to credit growth, adding that the country needed single-digit lending rate regime in "the next one year or so" to achieve its target of sustainable double-digit economic growth.
"I am yet to be convinced why the spread is as high as 10 per cent and sometimes even higher when in other countries it's between two and five per cent," the DP said. "If we are to grow sustainably over the next 50 years, the Central Bank would need to make credit affordable."
Ruto was also unhappy with the slow uptake of mortgages at just over "20,000" accounts saying the economy the size of Kenya should be doing at least a million.
The CBK has appeared helpless in reigning in the banking to offer affordable loans with both the governor Njuguna Ndung'u and his deputy Haron Sirima registering dissatisfaction.
While average lending rate stands at 17 per cent, deposit rate is at 6.43 per cent translating to a spread of 10.57 per cent. "It is important that the banking industry is seen to play its role in supporting vision 2030," Sirima said at a function on June 25.
"They need relook at their product pricing models in order to foster credit growth, encourage savings and thereby support government effort towards economic progress."
They spoke during the launch of a commemorative coin to mark the country's 50th anniversary this Thursday. The coin is a one-time limited edition and would not be circulated, Ndung'u said.