Kenya Interbank Rate Falls to 2-Month Low as Counties Get Cash

Interest rates that Kenyan banks use to lend money to each other fell to the lowest level in two months after the government released cash to local counties, boosting liquidity.

Interbank rates were at 7.49 percent for a second straight day on Feb. 14, the lowest level since Dec. 16, according to data compiled by Bloomberg. Since the beginning of February, the rates have closed each day either lower or unchanged.

The release of funds by the central government of East Africa’s biggest economy to the 47 county administrations last week improved liquidity in money markets, with cash channeled through commercial banks, said Bernard Omenda, head of treasury at Nairobi-based Equatorial Commercial Bank Ltd. The Kenya Revenue Agency has to distribute at least 15 percent of taxes it collects to the counties, according to the East African nation’s constitution.

“The release of those funds by the National Treasury will be processed by the banks and will improve liquidity,” Omenda said by phone today. “There had been a delay in releasing money to the counties.”

A call to Kamau Thugge, principal secretary in the Finance Ministry, wasn’t answered today.

The Central Bank of Kenya held its policy rate at 8.5 percent for a fourth time last month. The bank, which cut the policy rate five times from a record 18 percent since mid-2012, paused its monetary easing cycle in July. Inflation was little changed in January from a month earlier at 7.2 percent.

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