You can’t play politics with Central Bank

The Central Bank of Kenya is the banker, adviser and fiscal agent of the government.

As provided for by our Constitution, the Central Bank also exists to formulate and implement monetary policy so as to achieve and maintain price stability (thereby controlling inflation) and sustain the value of the shilling.

The importance of stable prices can hardly be overstated: most revolutions have been sparked by unpredictability of prices, especially those of basic goods.

One need only look at Tunisia and Egypt where long-standing regimes were removed mainly because they could not maintain stable prices.

Without economic stability, the centre of our already fragile coalition could not hold, and things would fall apart.

Monetary policy is thus a basic prerequisite to the maintenance of peace in the short-term and to the creation of the conditions required to grow business and eradicate poverty in the long-term.

Therefore, the importance of the Central Bank of Kenya and its leadership cannot be overemphasised.

Prof Njuguna Ndung’u has in the last four years done a sterling job, steering the ship that is the Kenyan economy through some rough seas.

Inflation has been low and the shilling has largely held its own against major currencies. This is in spite of the strife our country experienced in 2008 and its aftermath, as well as wildly fluctuating oil prices.

That is why some of the responses to his reappointment are surprising. Legally, those criticising the reappointment of Prof Ndung’u do not have a leg to stand on.

The governor of the Central Bank of Kenya does not hold a constitutional office and is not an appointment on which the President and the Prime Minister must consult.

Article 231 of the Constitution is clear that the composition of the Central Bank is a matter for legislation.

Such legislation already exists in the form of the Central Bank of Kenya Act, Chapter 491, Laws of Kenya. Section 11 (2) of that Act provides that the appointment of the Governor is done by the President.

Therefore, calls for consultation, or even vetting by Parliament are misplaced, and technically, out of line with the provisions of the Constitution. Prof Ndung’u, having done a good job, was eligible for reappointment and the President did not err, legally, in reappointing him.

Some readers will recall that the tenure of Mr Alan Greenspan as chairman of the US Federal Reserve spanned from 1987 to 2006 – and he served both Republican and Democratic governments.

Because he was able, his pedigree and political leanings were irrelevant and both sides of the American political divide were able to work with him.

This should certainly be the case with any governor of the Central Bank: we cannot afford to reduce such an important position to tribe or perceived political alignment. All we need to know is whether the man (or woman) knows his money.

In these heady days of a new Constitution, it is encouraging that every Kenyan with an opinion states it.