Kenya’s Finance Minister Henry Rotich on Thursday said he would propose repealing a cap on commercial lending rates, as he presented a budget including a new tax on financial transactions.
Private sector credit growth slowed sharply after lawmakers capped the amount of interest commercial banks can charge their customers at four percentage points above the central bank rate.
“I propose to amend the Banking Amendment Act 2016 by repealing section 33b of the said act,” he said, referring to the section of the law that sets the cap on interest rates for commercial lenders.
“This is to enable banks and lenders to provide more credit, especially to the borrowers they consider riskier,” he said.
Rotich targeted a budget deficit of 5.7% of GDP for the financial year starting next month, less than the 7.2% budgeted for 2017/18.
He projected tax revenues to rise by 17.5% to 1.9 trillion Kenyan shillings ($18.81 billion), equivalent to 20 % of GDP.
Robin Hood tax
“I propose to introduce a Robin Hood tax of 0.05 % of any amount of 500,000 shillings or more transferred through banks or other financial institutions,” he said in a presentation to parliament.
The government of the East African nation has been criticized in recent years, including by the International Monetary Fund, for ramping up borrowing for infrastructure investments, including a new railway completed last year.
Rotich said he was withdrawing an earlier proposal to introduce a higher tax bracket of 35% for individuals earning more than 750,000 Kenyan shillings per month, after members of the public raised concerns.
The current rate is 30% for the highest earners.