Wednesday December 13, 2017

Economic Distress in South Sudan to Hurt Kenyan Banks, IMF

South Sudan KCB banking hall. The International Monetary Fund has warned that low growth rates in East Africa and the turmoil in South Sudan could hurt Kenyan banks performance. PHOTO | MORGAN MBABAZI | NATION MEDIA GROUP

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NAIROBI – Lower growth rates across East Africa and turmoil in South Sudan will have an adverse impact on the performance of Kenyan banks, the International Monetary Fund (IMF) has warned.

The IMF which has revised Kenya’s Economic growth from 6.9 per cent to 6.5 per cent says cross border activities have exposed Kenyan banks to economic downturn across the region.

“In the event of economic distress in East Africa, in particular South Sudan, the IMF noted that cross-border activities of Kenyan banks could be adversely affected,” a statement by the IMF read.

REGIONAL BANKS

Eleven Kenyan banks have subsidiaries in the East African Community (EAC) member states as well as South Sudan where three, KCB, Equity and Co-op have operations.

Others in the region include DTB, Commercial Bank of Africa, Bank of Africa, Guaranty Trust Bank, I&M Bank, Imperial Bank, ABC and NIC Bank.
“Any cross border business will be affected by the down turn in the sector, but South Sudan has more vulnerability because of their political situation,” Kenya Bankers Association CEO Habil Olaka said.

According to the Central Bank of Kenya’s annual supervisory report for 2014, released in June, Kenyan subsidiaries registered combined profit before tax of Sh5.5 billion compared to Sh5.2 billion the previous year, with Tanzania accounting for 32 per cent of the total earnings.

SOUTH SUDAN TURMOIL

South Sudan was hit by political instability which led to a hard currency shortage with wide discrepancies between official exchange rates and black market exchange rates.

“Subsequently, this affected Kenyan customers of subsidiaries in South Sudan as they were not able to fully draw on their South Sudan Pound-denominated accounts after fleeing back to Kenya at the height of the crisis,” says the CBK report.

An uneasy calm has since returned to the country after President Salvar Kiir and his rival Riek Machar signed a peace deal on August 26, this year.

Source: The Nation Media

THE UPPER NILE TIMES

Tekle Mariam

A Senior news correspondent for The Upper Nile Times based in Addis Ababa, Ethiopia.


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