Kenya to continue experiencing economic challenges into 2024: Central Bank

He argues these factors could result in among other things, a sharp tightening of global financial conditions, high yields on sovereign bonds and the depreciation of domestic currencies against the US dollar and other major currencies.

Equally, many nations are also likely to experience worsened debt sustainability challenges  amid tight budgetary constraints and a rise in inflation.

“Given the limited fiscal space, expenditures toward social sectors, public investment, and safety nets for poor and vulnerable groups may become highly constrained,” the CBK governor said.

Thugge spoke amidst a growing concern among many nations including Kenya over the rising cost of living linked to a number of global factors including inflation, geopolitics, climate change among other factors.

Many developing nations in Africa including Kenya have also raised concerns over the increasing cost of servicing their debts due to the depreciation of their local currencies against the US dollar and other major currencies.

In Kenya, the government has in the last one year faced mounting pressure over the rising cost of living, all tied to both domestic and global factors.

A recent survey released by research firm Infotrak Research and Consulting in January this year, further showed that almost 73% of Kenyans are currently in dire economic distress due to factors such as the high cost of living, increased taxes, lack of jobs and poor farm yields and  others.

And to help mitigate against some of these challenges, the CBK governor argues that first, policy responses should be timely, targeted, and well-coordinated, with involvement of all key stakeholders including the government, central bank and financial sector players.

Second, a robust monetary policy communication strategy serves to anchor market expectations and prevent excessive market volatility.

“This has improved the public understanding of monetary policy decisions, anchored market expectations, and prevented undue market dislocations,” Thugge said.

Third, policies aimed at addressing supply-side constraints, combating climate change challenges, increasing employment, poverty reduction, and promoting food security are vital to resolve the structural challenges that monetary policy alone cannot address.

Finally, Thugge says that there is a need to enhance efficiency and financial inclusion through increased digitization. The CBK continues to be at the forefront in promoting and leveraging digital technology to improve efficiency and access to financial services.

“For instance, the recently upgraded Central Securities Depository infrastructure, DhowCSD, is a major step in enhancing efficiency in investment in government securities and transforming Kenya’s financial markets,” he said.