Rate hikes in the developed world are impacting Kenyan businesses, households and investors leading to costly loans, losses at the Nairobi bourse and weakened shilling.
Rate hikes in the developed world are impacting Kenyan businesses, households and investors leading to costly loans, losses at the Nairobi bourse and weakened shilling. The Bank of England and the Swiss National Bank followed the US Federal Reserve and raised interest rates to control rising inflation this week. The Bank of England raised rates for the fifth consecutive time while the US Federal Reserve delivered its first 0.75 percentage point rate rise since 1994.
Experts fear that interest hikes may lead to capital flight from developing economies like Kenya, making sovereign debts costlier and destabilizing their currencies. Foreign investors are shifting their money from the Nairobi Securities Exchange (NSE) to western capitals as they find them offering better returns. The development has forced Kenyan Treasury to cancel the sale of Sh115 billion Eurobond in international markets. The move is expected to push the State to borrow more from the domestic market, ultimately putting pressure on bank lending rates.
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The currency depreciation is already causing pain to importers and resulting in costly imported goods like fuel, cars and industrial raw materials. The stock market also has suffered a major setback wiping out Sh757 billions of investor wealth since January.
