Naming CBK governor will calm markets

Opinion and Analysis

 

Central Bank of Kenya headquarters in Nairobi. PHOTO | FILE 

By JAINDI KISERO, jkisero@ke.nationmedia.com

The financial markets are in a state of panic. Without a clear communication from the Central Bank of Kenya – and without clear direction on how the monetary authority expects the shilling to behave in the coming weeks – our currency may be headed for a free fall.

Me thinks that the government should move quickly and name the new central bank governor. Somebody must take responsibility and speak to markets.

As we went to press, the shilling had weakened to levels last witnessed during the currency crisis in 2010.

Yet, all that the Central Bank could do to shore up the currency was to go to the market to sell dollars.

Aren’t we depleting our reserves? What is the end game to all this?

Mark you, the government did not gazette Dr Haroun Sirima as acting governor when former governor, Prof Njuguna Ndung’u, left the scene.

And although the Monetary Policy Committee (MPC) still has a quorum, this key policy-making body has not had a full complement especially after the exit of Prof Ndung’u, who was  chairman, and the expiry of the terms of members whose terms ended.

I don’t understand why people in authority adopt such a cavalier attitude when it comes to appointing and replacing people to key pillars of economic policy like the MPC.

Of course, a new governor is not going to be the magic bullet to stem the slide of the currency.

But someone in authority must speaks to market-NOW.  The Central Bank has not had a substantive head for in excess of 60 days.
And a new nominee will still have to be vetted by the National Assembly.

Calm and confidence will only return the moment the markets get to understand the options open to the Central Bank.

Otherwise, we must brace for games and tactics by dealers and treasury managers, which unfortunately will add to the volatility the currency is facing.

The stage will have been set for loud complaints by the political class about how greedy bankers and speculators have attacked the shilling.
In truth, the economy is not sitting pretty. The fundamentals point to worrisome trends.

When we single out speculators for the slide and volatility of the exchange rate, we are engaged in scapegoating.

The fact that the US dollar, our main trading currency with the rest of the world is strengthening against all other hard currencies is a major factor.