Nairobi - Kenya is still open to foreign investment in its banking industry despite a moratorium imposed on issuing new licenses, central bank Governor Patrick Njoroge said.
East Africa’s biggest economy needs stronger supervision in banking, which resulted in the temporary ban on licenses, Njoroge said at a conference in Cape Town on Friday. Kenya wants investment that can “add value and not just do a copycat,” he said.
Njoroge placed two banks under administration since he came to office in June. Dubai Bank Kenya Ltd. was placed in liquidation in August after it ran out of money, while Imperial Bank Ltd. was placed under statutory management in October after alerting the authorities to “inappropriate banking practices.” The halt on new licenses was imposed on November 17.
The moratorium “is to give us space to strengthen our supervision,” Njoroge said.
The governor added that authorities are committed to maintaining a flexible exchange rate. Kenya has sufficient buffers to “ride out” the impact from any tightening of monetary policy by the US Federal Reserve, he said.
Infrastructure bond
The central bank said on Friday it would issue a nine-year bond with a coupon rate of 11 percent to raise as much as 30 billion shillings ($294 million) for infrastructure projects. Kenya sold another 30.7 billion shillings worth of five-year paper at a yield of 13.92 percent on Wednesday.
"The infrastructure bond has had a lot of interest from foreign investors, even domestic,” Njoroge said. “It’s a very attractive thing because you are told what is the specific project and it’s something anybody can support.”
Swelling twin deficits remain a worry for many investors as the government increases spending on much-needed infrastructure projects. The $60.9 billion economy is running a budget gap of 8.7 percent of gross domestic product in the fiscal year to June 30, 2016. The current account deficit may widen to about 9.9 percent of output this year, according to the International Monetary Fund.
Njoroge said the government’s aim was to have a more balanced budget or a smaller deficit.
“In the end, the government has to credibly not just signal, but show what its borrowing needs are,” he said.
BLOOMBERG