Deficit cuts banks capacity to fund state

A customer is served by a bank teller. Growth in deposits has slowed to three percent in the last few years. FILE PHOTO | NMG

The Treasury’s ability to raise cash from commercial banks has shrunk following a pacey growth in the fiscal deficit and lenders’ slowing deposit accumulation.

Rating agency Moody’s in a new report said Kenyan banks are only seeing deposits at three percent of the Gross Domestic Product (GDP) while the fiscal deficit has typically exceeded seven percent in recent years – leaving a gap of four percentage points.

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