Robert Shaw
22 August 2007
opinion
Nairobi — THE PAID ADVERT APPEARING in the Sunday Nation of August 12 by Treasury permanent secretary Joseph Kinyua was a welcome contribution to the debate on the proposed major changes on the structure of the Central Bank of Kenya and the role of its governor that are contained in this year's Finance Bill.
The advert was in response to an article I wrote appearing in the Nation (July 17) titled 'Planned changes in Finance Bill will emasculate Governor'.
Before responding to the substance of his "commentary", there are two important points that need to be emphasised. It is incorrect, insulting to MPs, and an affront to the principle of separation of powers to bury such major and contentious proposals concerning the structure and running of the CBK in the depths of the Finance Bill.
Many people, MPs included, were either unaware of what was contained in sections 70-75 of the Finance Bill or the serious implications of those clauses. What I did was to highlight them
MR KINYUA DOESN'T AGREE WITH some of the points I made. That is his prerogative, but to describe them as erroneous or misleading is rather presumptuous, to say the least.
What Finance minister Amos Kimunya was essentially doing was trying to sneak in these major changes with as little attention as possible.
Let us put it another way: The minister should have been more upfront and transparent with such fundamental proposals so that they receive the attention and deliberations they deserve.
Secondly, Mr Kinyua can trot out as many examples as he wants about the trends or developments vis a vis central banks in Australia, USA, UK or New Zealand. But this is Kenya and the blunt truth is that many in this government, as in past governments, have an addictive tendency to controlling and interfering in the bank's affairs much more than they should.
Further to that, the checks, balances and institutions to prevent or restrain such actions are weaker here than in many countries, including several that Mr Kinyua cites. Indeed, one can go further and argue that the criteria for such appointments in many other countries are much tighter and more accountable than here.
Indeed, most appointments in key Government institutions and parastatals are still made on the basis of political discretion or favour rather than on more meritocratic considerations. Very, very few public appointments are subject to a professional recruitment procedure.
Mr Kinyua's commentary does not answer the specific points I raised, which undoubtedly give the minister more power and control over the CBK, as well as weakens the position and independence of the governor.
There are two problems with the insertion of the clause "the bank shall support the economic policy of the government, including its objectives for growth and employment".
First, the CBK is the guardian of monetary policy, and that should remain sacrosanct. Secondly, there is adequate provision in the Central Bank of Kenya Act for a procedure to be followed if the minister and the governor disagree.
I do not have a problem with the setting up of a Monetary Policy Committee per se. The problem is that the minister even has a say on which CBK staff should be on it - "two members appointed by the governor from among the staff in consultation with the minister".
In effect, the whole of that committee will comprise of people who are either appointed by the President, the minister or who have to be approved by the minister.
The real bone of contention, though, is the appointment of a chairman and a board of directors with the former replacing the governor as chairman.
SUBSECTIONS 72(a) to 72(g) GIVE THE chairman and the board major powers including "keeping under constant review the performance" of both the bank and the governor which arguably change it from being an oversight board to an executive board.
Further to that, with such sweeping powers, how can one say that it will not get involved, even by default, in monetary policy? Where are the mechanisms for checking on the performance or otherwise of this politically-appointed board?
Mr Shaw is a Nairobi-based businessman.
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