Experts want two six-year terms for CBK governor

CBK governor Njuguna Ndung’u. Photo/FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• Experts say the one term of six years now provided in the draft Bill could limit effectiveness of the office given that it is a technical position.

Central Bank of Kenya (CBK) governor will be given two terms of six years each instead of one term if views of a State team on CBK draft Bill are adopted.

Stakeholders Tuesday were told the one term of six years now provided in the draft Bill could limit effectiveness of the office given that it is a technical position.

“It would be prudent to give the governor up to two terms of six years each so that he can achieve the objectives set out in the Bill,” said Arthur Namu, a participant at the meeting and the chair of the State Corporations Advisory Committee at the Office of the President.

Mr Namu whose team has furnished the Treasury with the proposals suggested the governor’s performance should be put under the oversight of the board of directors to ensure that he undertakes his role in accordance with the CBK Act.

According to John Luusa, chairman of the Institute of Directors that trains top corporate executives and board members, a clear separation of the roles of the board and those of the CBK management will be critical in ensuring best performance of the CBK’s roles as set out in the law.

“You need to separate the role of the management from that of the board. The board is the oversight body on the CBK management and it should be strong and have clear functions,” he said.

Mr Luusa and Mr Namu spoke during the public deliberations on the Draft CBK Bill (2014) held at the Kenya School of Monetary Studies in Nairobi.

Mr Namu suggested that the Treasury principal secretary should be a member of the Monetary Policy Committee (MPC), an independent agency that sets the benchmark interest rates upon which several other rates are based.

In the Draft Bill, the members of the MPC are the governor, two deputy governors as well as the CBK staff member heading monetary policy docket and another four independent members recruited on expertise.

“The MPC should report to the board and the National Assembly as the higher authority. The principal secretary to the Treasury should also sit on the MPC even if only as an observer,” said Mr Namu.

Under the draft, the MPC is to be accountable to the public through making dissemination of information at the national and county levels which Mr Namu said will now be a reality.

READ: Draft Bill proposes single term for the central bank chief

Economist Dickson Khainga said the form in which the MPC provide minutes of its meetings should be made clear in the Bill whether it would be verbatim or a summary.

Dr Khainga, who currently heads the macroeconomics division at the quasi-government Kenya Institute for Public Policy Research Analysis (Kippra), said the function of finance sector stability should be a shared responsibility since it stretches beyond banking into the capital markets and insurance.

“What we need is a clear framework for sharing of responsibility on the financial sector because some risks are systemic and not just confined to the banking sector,” said Dr Khainga.