Over the last few days the report of the Parliamentary Select Committee on the Depreciation of the Shilling has dominated parliamentary debate. In short, the report of the Committee posits a regulatory failure and lax monetary policy on the part of the Central Bank of the Kenya created an environment that allowed those in financial services industry to act in a way that led to last years decline of the shilling to a historic low of Kshs. 107 to the dollar.
As the current Governor of the Central Bank of Kenya and sitting head of the Central Bank at the time of the shilling’s decline, Njuguna Ndungu’s competence and ability to craft effective regulatory policy was called in to question. So bad was the Central Bank of Kenya’s regulatory failure and the ensuing fallout – the 25% decline in the shillings value, the sharp rise in interest rates and inflation, that a Reuters survey of regional analysts labelled Kenya’s Central Bank Governor Africa’s least effective policy maker and the continent’s worst Central Bank Governor.
The Parliamentary Select Committee formed to look into the shilling’s rapid depreciation found “Prof. Ndungu’s conduct and behaviour incompatible with what is expected of the holder of the office of Governor of Central Bank of Kenya.” In the lead up to the tabling of the report of the Parliamentary Select Committee on the Depreciation of the Shilling, and in the period since the tabling of the report, the majority sentiment in parliament seemed to lean towards holding the Governor of the Central Bank of Kenya to account for the regulatory failure after all Governor of the Central Bank is central to crafting regulatory policy.
Speaking on the action, or inaction, of the Governor of the Central Bank during the depreciation of the shilling, MP for Wajir, Aden Keynan, declared that the governor’s behaviour constituted, “an economic crime against the people of Kenya.”
Ntoithia M’Mithiaru, MP Igembe North, who seconded the motion to adopt the report of the committee, stated, “At the centre of activity somebody was watching, somebody was regulating.”
“At the very least, the governor was ineffective,” said Shakeel Shabir, MP Kisumu Town East.
“We’re paying Prof. Ndungu not to engage in politics, we do not pay him to enjoy himself and tell us he cannot do anything, if he cannot this thing, the only thing this House can tell Prof. Njuguna Dung’s is to go home so that we can hire somebody who is competent.” John Mbadi MP Gwasi.
(For a full account of who said what see Searchable Hansards)
It is of course impossible to say what kind of lobbying goes on behind the closed doors parliament however in what seems like the ultimate the flip-flop, in under five days, Parliament has voted to have the name of the governor of the Central Bank of Kenya expunged from the report of the Parliamentary Select Committee on the Depreciation of the Shilling. In a secret ballot 46 out of 83 Members of Parliament voted to the have the Central Bank Governor’s name removed from the report. The implication of course is that the Governor of the Central Bank is effectively absolved of wrongdoing. It also means that recommendations that involve Central Bank Governor e.g. the recommendation made by the committee that a tribunal be set up to probe the not only the governors’ conduct at the time of the decline of the shilling but he’s competence as well, are now redundant.
What are your thoughts on Parliament’s decision to have the Governor of Central Bank of Kenya’s name expunged from the report of the Parliamentary Select Committee on the Depreciation?