Next President faces tough task as top CBK chiefs exit
Kenya’s fifth president is expected to be sworn into office on the first Tuesday after 14 days of results declaration in the planned August 9 polls and among the list in his in-tray will be the huge task of resuscitating a fragile economy.
The task comes against the background of a still-raging global pandemic and a lingering mass exodus of top honchos at the country’s apex bank – the Central Bank of Kenya (CBK), most of whom have cleared their second term in office.
Experts say that Kenya’s mounting debt burden which stood at Sh4.03 trillion in domestic liability alone as of March this year and Sh4.17 trillion in external debt stock will be a major headache.
“The rising inflation rates and forex crunch concerns, all of which are threatening the survival of home-grown businesses will be a concern,” said an analyst. Among these challenges is the imminent departures of key faces at the CBK, whose decisive inputs are often the most sought-after by the Presidency.
CBK’s Board chairman Mohammed Nyaoga, Governor Patrick Njoroge and his deputy Sheila M’Mbijjewe are all set to exit their positions next year with their second tenures in office coming to an end.
While the Central Bank is constitutionally deemed independent, its future leadership in the post-Njoroge era– a very familiar face to the financial sector, rests on the most political of questions. Who is in government? Ordinarily, the bank’s board of directors oversees CBK’s functions by formulating key policies including guidelines that govern the Monetary Policy Committee (MPC). It also reviews the committee’s performance periodically.
That board now chaired by Nyaoga, comprises 11 members including Njoroge, National Treasury Principal Secretary Julius Muia and eight non-executive directors all of whom are appointed by the President.
Reassure the public
But it is the person who succeeds Njoroge as a leader and the face of CBK who will have to brace for the challenge, a candidate who among other dynamics, will be trusted to keep the markets calm and deftly reassure the public that the country’s central bank would support the economy as the country ushers in its fifth administration since independence.
Njoroge’s entry into the top bank from the International Monetary Fund (IMF) gave birth to never-seen-before strict enforcement of banking rules and led to stability in the sector with small businesses and borrowers from digital lenders key beneficiaries of his tenure.
Ideally, CBK’s governor and his deputies are appointed by the President but must be vetted by Parliament and are entitled to hold such positions for a term of four years, but are eligible for re-appointment for one further term of four years.
Predictably, CBK’s top leadership is spending its final days in office trying to reshape the country’s delicate economy and undertake last-minute adjustments to cushion the next administration’s fiscal policies.
Such modifications include the recent decision by the Central Bank’s MPC which stretched its financial safety net wide – raising its policy lending rate by half a percentage point to 7.5 per cent from 7.0 per cent last week to stem rising inflation and stabilize the shilling.
Inflation, which is the rate at which the value of a currency is falling and, consequently, the general level of prices for goods and services are rising, has continued to build up on account of rising oil prices triggered by Russia’s invasion of Ukraine and its direct impact of a weaker currency. Another tough balancing act for the next President and the new CBK leadership will be the need to address the exorbitant prices of key food items like maize flour, milk and wheat products which continue to increase straining the majority of Kenyan households that are still dredging from the economic hardships left by the plague.
Kenya’s inflation rate accelerated to 7.1 per cent in May, from 6.5 per cent in the previous month, the highest reading since February of 2020, as the cost of food products continued to rise sharply.
Kenyan Shilling against the US dollar exchange rate transacted at Sh117.10 at the close of Nairobi Securities Enterprises (NSE) trading last Friday in what has been a consistent but perturbing dip in its value against major world currencies.
While the Parliamentary Budget Office (PBO) insists the country has surpassed its debt sustainability thresholds, particularly the debt service-to-revenue ratio – implying that the economy is not generating enough revenues to cover its debt payments, the next President is at present weighed down by the burden being left behind by the current government.