At some point, the rate reached 9.5 per cent last week but the average has hovered around eight per cent.
Data from the Central Bank of Kenya (CBK) shows the rate increased to a weekly average of 8.29 per cent from 7.23 per cent the previous week.
The tightness in the money market started two weeks ago – the week ending July 25 – as banks sought funds for remittances of value added tax whose deadline is the 20th of every month.
The bank-to-bank lending rate has neared the 10 per cent mark in the last one week as the Kenyan shilling liquidity tightened following low government spending.
At some point, the rate reached 9.5 per cent last week but the average has hovered around eight per cent. Data from the Central Bank of Kenya (CBK) shows the rate increased to a weekly average of 8.29 per cent from 7.23 per cent the previous week.
“Interbank market liquidity conditions remained relatively tight during the week ending August 8, 2018, partly reflecting the seasonal low government spending at the beginning of the fiscal year. The weighted average interbank rate increased to 8.29 per cent from 7.23 per cent in the previous week,” said the CBK.
Genghis Capital, an investment bank, noted that the liquidity was tight despite the coming of the regulator into the market to inject some funds.
“Kenya shilling liquidity continues to get worse as inter-bank hit a high of 9.5 per cent with an average of 8.1 per cent on volumes of Sh14.72 billion. This was despite the regulator coming in everyday to fund the market,” said Genghis Capital in its note to clients last Wednesday.
As the rates rose, banks borrowed less with the total amount transacted in the week totalling Sh57.17 billion compared to Sh61.88 billion in the previous week.
The highest amount of Sh14.72 billion was transacted on Wednesday when the rate reached a high of 9.5 per cent at some point, but averaged 8.14 per cent for the whole day.
The tightness in the money market started two weeks ago – the week ending July 25 – as banks sought funds for remittances of value added tax whose deadline is the 20th of every month.
