Global economic factors such as inflation and the rapid monetary policy tightening in advanced economies are likely to continue affecting Kenya’s economy in 2024, even as the government continues to face growing pressure to ease the cost of living.
A statement released by the Central Bank of Kenya governor Kamau Thugge shows that while Kenya has made significant steps in lessening some of the economic shocks caused by both domestic and external factors, a lot more needs to be done to make life easier for Kenyans.
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Thugge, in a paper published by Foresight Africa, argues that rising inflation in the global market as well as changing monetary policies in developed economies are some of the factors that are likely to affect many markets across the globe.
Equally, many nations are also likely to experience worsened debt sustainability challenges amid tight budgetary constraints and a rise in inflation.
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.