NAIROBI (Reuters) – Kenya’s government will seek a compromise with parliamentarians over demands to cap bank lending rates that are holding up budget finance legislation, incoming acting Minister of Finance Robinson Githae said on Monday.

Kenyan Members of Parliament sit during the reading of the 2008/2009 budget at Parliament Buildings in the capital Nairobi, June 12, 2008. REUTERS/Handout/Presidential Press Service

Just before parliament’s Christmas recess, outgoing Finance Minister Uhuru Kenyatta withdrew from debate a bill covering financing needs for the year to July this year after lawmakers introduced an amendment seeking to control banks’ lending rates.

If the government cannot get the finance bill through parliament when it resumes sitting on February 14, the government may run out of funds for its day-to-day business and development programmes.

“The first priority is the finance bll. We have to negotiate over the amendments. We have to get a compromise because there is no alternative,” Githae told a news conference while taking over formally from Kenyatta.

Kenyatta, who is running for president in an election due by March next year, was forced to resign as finance minister last week after the International Criminal Court confirmed charges against him over his alleged role in bloody post-election violence in 2008.

The government opposes the parliamentarians’ move to cap lending rates for banks at no more than 400 basis points above the central bank rate because it goes against the country’s free market policy.

Officials and businesses routinely complain that banks charge borrowers too much with the spread between lending and deposit rates standing at over 10 percentage points in recent years.

Githae, a lawyer and minister for metropolitan development, told a local paper over the weekend that he would also prioritise normalisation of high interest rates and maintenance of exchange rate stability.

Kenyan lawmakers often seize the need for passage of crucial spending bills as a negotiating tool whenever they are locked in a showdown with the executive.

Other items in Githae’s in-tray include conclusion of a $600 million loan with three banks to substitute local borrowing, and

preparation of a budget that will require balancing huge spending needs, including an election, with a policy of fiscal consolidation.

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