By Jackson Okoth
The country’s economy could catch a cold from the unfolding banking crisis in Cyprus., especially if the uncertainty surrounding this year’s post-poll period persists.
“The crisis in Cyprus will affect us slightly owing to the fact that Kenya’s main tourist and horticulture markets are located in Europe. While we could be hurt, this latest crisis is smaller compared to the global financial meltdown — where upon we emerged stronger,” said Dr James Mwangi, Chief Executive of Equity Bank Group.
He made these remarks yesterday at the groups’ 9th Annual General Meeting (AGM) held at the Kenyatta International Conference Centre (KICC), Nairobi.
Cyprus is expected to put in place measures to prevent a run on the banks by depositors anxious about their savings. This is after the country agreed to a painful rescue package with international lenders. Cypriots fear a bailout deal will push their country into an economic slump and cost many jobs.
European leaders said the deal averted a chaotic national bankruptcy that might have forced Cyprus out of the euro.
Control measures
And with banks due to reopen today, Cyprus Finance Minister Michael Sarris said he expected the control measures to be ready.
Banks in Cyprus are due to open today with authorities keen to limit the possibility of large sums of money leaving the banking system, something that could hurt households and business.
This year’s election had long been viewed as the single greatest risk factor facing the economy this year. The relatively peaceful passage of polls has provided a boost to investor sentiment and expectations of more robust growth. In particular, the settling of the presidential election in a single round is seen to have averted a potentially damaging and prolonged period of economic and political uncertainty.
And initially, the markets rallied. The Nairobi Stock Exchange, which had already registered strong gains on foreign investor buying ahead of the March 4 election, rose strongly in the first few trading days following the result.
Appreciated
The shilling also appreciated in the immediate aftermath of the vote, allowing the Central Bank of Kenya (CBK) to rebuild foreign exchange reserves.
These rose to $4.99 billion (Sh426.4b) on 14 March, from $4.95 billion (Sh423b) just a week earlier, hinting at the extent of the CBK bid. Had it not been for official intervention, the shilling may well have rallied more.
“However, uncertainty remains. At the time of writing, the legal challenge to the election result brought by Prime Minister Raila Odinga, is still before the courts, with irregularities in both the vote tallying process as well as voter registration cited,” said Razia Khan Regional Head of Research, Africa-Standard Chartered Bank.
