Looming pain for borrowers as loan relief ends

The Central Bank of Kenya (CBK) has said that March 2 marked the end of the period for allowing banks to restructure loans for borrowers hit by the Covid-19 pandemic.

Policymakers unveiled the initiative to help distressed borrowers in March last year at the onset of the coronavirus crisis, helping to partly cushion the economy reeling from the pandemic impact.

Economic growth slowed to 0.6 per cent last year, initial estimates show, well below the government’s earlier forecast of 6.2 per cent, as the pandemic hit tourism, suppressed exports and eroded jobs. Official data for the full-year are due next month.

Banks had restructured loans worth Sh569.3 billion at the end of February, CBK said in a statement.

That represented 19 per cent of total loans, having dipped from 57 per cent of total loans at the depth of the crisis, it added.

Borrowers who still have outstanding restructured loans will have until June 3 to regularise them, the regulator said.

The loan relief initiative is among the last stimulus policy measures to be unwound by the government.

Authorities re-imposed charges on mobile phone-based transfers of small amounts of cash at the end of last year, having removed them in March to encourage cashless transactions and curb the spread of the virus.

In January, the government also reversed payroll and income tax cuts, unveiled last April to prop up demand in the face of the economic shocks caused by the pandemic.

Kenya, which has so far reported 122,040 cases of Covid-19 infections and just over 2,000 deaths, is currently gripped by a third wave of infections, which is stretching its health facilities.