IMF WARNS OVER HIGH LOAN RATES

The International Monetary Fund has warned that recent increase in credit rates could lead to financial risks in the region.

In the latest edition of the Regional Economic Outlook for Sub-Saharan Africa launched in Nairobi on Thursday, the global institution said lending by financial institutions has risen considerably over the last 12 years attributed to increased household incomes.

“Most sub-Saharan African countries have experienced a decade-long rapid increase in private credit. Real credit to the private sector grew five fold over the period 2003-2014 an average annual progression of 16 per cent over 10 years leading to a doubling of the credit-to-GDP ratio for the region as a whole,” says the report.

According to the IMF, though other factors that commonly affect debt such as high interest rates may also play a role, numerous studies have credited episodes of unusually high credit growth with poor economic performance.

By Dennis Ndeleko