The Central Bank of Kenya (CBK) will play a key role in building a strong case against an appeal to revise a High Court ruling on the rate cap.
The law capping interest rates was declared unconstitutional by a three-judge bench, but the judgment has been challenged in a higher court.
CBK has jumped on the opportunity presented by the appeal to argue that the law is interfering with its mandate.
CBK boss, Dr Patrick Njoroge, also announced that the country is in no rush to secure a new standby credit facility with the International Monetary Fund (IMF) as the economy remains resilient. He, however, noted that a deal that serves the country better will eventually be secured.
“We are not in a rush. We have had meetings and i expect that we will continue,” Dr Njoroge told reporters during a press briefing.
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With regard to the interest caps, Dr Njoroge hopes the CBK will be allowed to join the appeal. In the initial petition filed by Boniface Oduor, CBK was only an interested party.
The High Court ruled that Oduor was unable to convince it that the rate cap interfered with monetary policy, but CBK said they have a strong case to prove this at the Court of Appeal.
“We have cross-filed after the ruling was appealed because I think it is us who should convince the court that this matter is an encroachment into the role of the Monetary Policy Committee (MPC),” Dr Njoroge said yesterday in Nairobi. The MPC on Wednesday discussed the rate cap ruling, stressing that interest rate ceiling constrains the formulation, conduct and effectiveness of the monetary policy.
“Further, these interest rate caps have hampered access to credit by growth sectors, particularly Micro Small and Medium Enterprises,” Dr Njoroge said. The High Court had ruled that the rate cap law was vague, imprecise and ambiguous and sections of it imposing penal charges on bank CEOs, including penalties and sentences were unconstitutional. The courts gave the National Assembly 12 months within which to amend the law.
Consumer Federation of Kenya then appealed the ruling as the second interested party, being dissatisfied with part of the argument of justices Francis Tuiyott, Rachel Ngetich and Jacqueline Kamau.
Private sector credit grew by 3.4 per cent in the 12 months to February compared with three per cent in January.