Firms and Individuals who Tapped Dollar-denominated Loans Have Been Offering Banks Repayments in Local Currency
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Firms and individuals who have taken out loans in US dollars are now struggling to repay them, leading to a dysfunction in the foreign exchange market.
Borrowers in various industries such as real estate, transportation, communication, and construction, as well as individuals, are facing challenges in obtaining US dollars. Consequently, they are opting to repay their loans in the local currency. This has led to a technical default on their loans and has contributed to the rise in non-performing loans. The Central Bank of Kenya has observed a consistent growth in defaults, with the total amount reaching Sh615.54 billion by the end of September.
The current NPL ratio stands at 15 per cent, comparable to the 15.4 per cent observed in June 2007. In October, the NPL ratio deteriorated to 15.3 per cent, highlighting a persistent problem with loan defaults. Lenders have been required to set aside additional funds in preparation for a rise in defaults. The IMF reports that a substantial portion of these defaulted loans are in sectors like personal loans, real estate, transport and communication, and building and construction.
It is uncertain whether borrowers in these sectors have a natural hedge, as they are not major export sectors. The IMF also notes that banks are at risk from rising interest rates and exchange rate depreciation. Despite the Treasury's efforts to address the scarcity of dollars through an oil supply deal with Gulf companies, the challenge of accessing dollars persists.
The Treasury has informed the IMF that the oil import agreement did not ease the FX pressures and plans to end the deal because it caused distortions in the FX market. As stated in the report, Kenya's FX liabilities accounted for 34.9 per cent at the close of the third quarter in the previous year. This percentage was higher than the median of 31.6 percent for emerging and developing economies that have accessible data.
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This is only the beginning of some tough times ahead.The ruling elites will be just fine though.
The beginning of Kenya's default to the world bank & IMF loan is looming and within 3 months will be quite evident. Despite all the promises and efforts in covering up the illegitimate debts of Kenya which Ruto signed them before the budget was passed out. That's a deadly mistake he committed to Kenyans in paying out through heavy taxes. Additionally most of those illegitimate debt are unaccountable in the consolidated account in the Central bank of Kenya. Therefore both Uhuru and Ruto including few top notches should be held accountable as they personal loans. We need the 3rd Liberators in Kenya to stand up and match to the world Financial courts and declared those debts as Odious debt. Just like how Madagascar did in 3 years ago. We can't afford to continue keeping quite and let the few elites leads the rest 55 million people in astray for years and more to come. It starts by acknowledge that we're humans too and why paying for loans did benefit the country at all.
I mean its obvious how do yo expect to get Dollars if there's no money circulation in the country at the first place.
Arap samoei ruto is a super conman.Conned people lands,conned uhuru his former boss by betraying him,conned hustlers on fake bottom ups economy,conned IMF on g2g oil deals,continues to con netizens on taxes and finally in all this he jumps into the church and corrupts all the would be good shepherds into his conmanship.