Parliament drops plan to strip CBK of its powers

 

Central Bank of Kenya Governor Patrick Njoroge. PHOTO | SALATON NJAU | NMG

By EDWIN MUTAI
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A parliamentary committee has struck out sections of a Bill that sought to usurp the powers of the Central Bank of Kenya (CBK) as a fiscal agent and banker to the government.

MPs have proposed changes to the Debt Management Authority Bill which seeks to establish an independent body to manage the country’s debt with a view of reducing the burden which is projected to hit Sh8.6 trillion in June.

The Bill proposes to take away the mandate of CBK as the government’s fiscal agent and vests it in the Public Debt Management Authority.

The Bill, sponsored by Nambale MP Sakwa Bunyasi seeks to establish an authority that will maintain a register of all loans advanced to national and county governments.

It will compel the CBK to work together with the authority and the Treasury to determine the form of securities to be created, issued or floated.

“This is an anomaly as section 32 of the CBK Act provides that the fiscal agent for all of the government’s transactions with international financial institutions of which Kenya is a member or with which Kenya is associated shall be the CBK,” the committee said.

“The above functions are critical to CBK’s effectiveness in its other functions and importantly, coordination of monetary and fiscal policies, managing the exchange rate, lender of last resort to the banking sector and regulator of the National Payment System,” Dr Njoroge said.It has proposed a raft of amendments to the Bill after the CBK governor Patrick Njoroge protested against sections that seek to clip the regulator's powers.

Dr Njoroge said stripping CBK of its function as a fiscal agent and banker to the government will not only weaken CBK and overall economic management but also place those responsibilities in an organ that does not capacity to deliver.

“Further, effectively. It will therefore require a lot of resources to set up the Public Debt Management Authority,” Dr Njoroge said in a presentation to the committee.

Debate on the Bill was concluded last week and it awaits the committee of the Whole House where MPs scrutinise each clause and propose amendments.

“The committee agreed with the views raised by the CBK and consequently proposed further amendments to the functions of the authority,” Gladys Wanga who chairs the team said in a report to the House.

She said as proposed in the Bill, the Public Debt Management Authority will decouple debt operations from the government's financing needs.

“For instance, the government will be uncertain about its ability to borrow to finance expenditures when revenues fall short and there will be poor coordination with regards to long- term borrowing to finance,” Ms Wanga said.

Currently, the committee said the financing of operations of the national government are linked to its debt operations and borrowing program through the annual Medium Term Debt Management Strategy.

emutai@ke.nationmedia.com