Members of Parliament on Tuesday wasted an opportunity to set the economic agenda for the country during the vetting of the leadership of the Central Bank of Kenya.
The Central Bank manages interest rates and inflation and is a key determiner of welfare and quality of life.
But instead of MPs probing the philosophy and beliefs of the nominees and setting out the public’s expectations, MPs dwelt at length on the lifestyle choices of the proposed governor, Dr Patrick Njoroge.
Dr Njoroge, Deputy Governor Sheila M’mbijjiwe and chairman Mohamed Nyaoga were before the Finance, Trade and Planning Committee of the National Assembly, chaired by Ainamoi MP Benjamin Langat.
The committee will give a report to the House, which will vote to approve or reject the nominees.
The lack of a clear understanding of the issues became apparent when members were questioning Mr Nyaoga and veered off to administrative and governance issues, which are handled by the management and not the board.
At some point, Mr Nyaoga had to explain to the committee the difference between the roles of the CBK board and the management and even cited the United Kingdom and German models to help them appreciate the distinction.
Mr Nyaoga had been put to task to give recommendations regarding the collection of taxes, especially the capital gains tax on stock trading that had already been recommended for replacement with a 0.3 per cent levy in last week’s Budget proposals.
He was also asked to explain how he would navigate between his role and the governor’s role on technical issues, including in the Monetary Policy Committee (MPC).
“The formulation of the monetary policy is reserved for the MPC and remember the chairman of the MPC is the governor. CBK has a dual board with the technical wing and the governance wing so there is a clear separation of roles between the board and the management,” Mr Nyaoga told the committee.
COST OF LIVING
And rather than ask Dr Njoroge how he intends to help the country manage the spiralling cost of living and what he would do to bring the cost of lending down, the MPs sought to know why he was still single at 54.
“I am single by choice and I am comfortable that way,” Dr Njoroge told them. “There is nothing sinister with that and I am sure this committee has done its due diligence on what sort of a person I am.”
MP Jimmy Angwenyi then retorted that there was a lawmaker who had a single sister hence the interest in his marital status. Dr Njoroge belongs to a Catholic congregation whose devoted members believe that they promote their faith through their work and everyday lives.
Nambale MP John Bunyasi also asked Dr Njoroge whether he would continue working for the International Monetary Fund after being confirmed as CBK governor. Dr Njoroge is currently an adviser to the IMF deputy managing director.
The MPs were also concerned about his lack of assets and asked him whether he was reluctant to invest or was simply poor.
“Yes, I don’t have a single asset here in Kenya and this is where I am at this point and it doesn’t mean that this is how it will be forever and I subscribe to being very deliberate about that. This is my economic model and may be, years after retirement, I would want to invest in other things. That should not mean I have any financial inabilities. It comes with the profession,” the economist said.
While worrying about the lack of title deeds in the proposed governor’s name, MPs probably did not notice how clear and independent-minded he was on crucial issues and how easily he articulated positions contrary to those taken by the government and MPs.
OFFER CHEAPER LOANS
He disagreed with a proposal by the legislators to either form a government bank that would offer cheaper loans and hence lower interest rates or for a law to control lending rates.
“I think it would be a big mistake to even think that we can control interest rates through legislation,” he said. “It will not work. That is why we moved from price control and commercial banks just need to get confidence to move ahead with market-based solutions that are sensitive for their businesses.
“This is something we have done in other countries by assuring the banks that if the economy is under control, we will come up with a plan that is acceptable to all.”
He said the country will need to deal with underlying issues like inflation and controlling the surges that make banks extend interest spreads to remain profitable. Kenya’s interest spread currently averages 6.8.
Dr Njoroge was also candid about Kenya’s external borrowing, saying it had reached a peak beyond which it should not be allowed to go. He said Kenya must be careful in considering the returns on the investments the external loans were put to and urged caution on how the money was spent.
National Treasury Cabinet Secretary Henry Rotich last week told Parliament that he intends to borrow Sh340.5 billion from external lenders to cover this year’s fiscal deficit.