Kenyan private-sector activity shrank in September at the fastest rate in at least three years on concerns over political uncertainty, a drought, and a credit squeeze due to a cap on commercial lending rates, a survey showed on Wednesday.
The Markit Stanbic Bank Kenya Purchasing Managers’ Index(PMI) fell to 40.9 from 42.0 in August, the lowest reading since the data series began in January 2014 and well below the 50-point line separating contractions in activity from expansions.
Kenya is due to hold a re-run of its presidential election on Oct. 26 after the Supreme Court voided President Uhuru Kenyatta’s win in an August vote due to irregularities.
But opposition leader Raila Odinga has said he will boycott the new poll unless some officials on the election board are replaced.
Conditions continued to deteriorate
“For a fifth consecutive month, conditions in Kenya’s private sector continued to deteriorate, which is reflective of the protracted political impasse in the country,” Jibran
Qureishi, the economist for East Africa at Stanbic Bank, said in comments accompanying the survey.
“Firms continue to bemoan the unavailability of access to credit, which has been restrained as a consequence of the interest rate capping law.”
In September 2016, the government capped commercial lending rates at four percentage points above the central bank’s benchmark rate, which stands at 10%, and imposed a minimum deposit interest rate of 70% of the benchmark.