Parliament finally passed the Finance Bill. But Finance minister Njeru Githae had to literally bribe the MPs with a generous severance pay to get them to pass it.
The lesson is all out there. When it comes to something for their bellies, MPs will always close ranks.
The lengths to which our legislators are prepared to go to compromise what is in the interest of the taxpayer is a blatant outrage.
I did not support idea of introducing interest rate controls in the manner proposed by Mr Jakoyo Midiwo.
But I will not question the case for forcing banks to reduce the high interest rates spreads they are enjoying right now.
For the truth of the matter is that the prevailing interest rate regime is choking business.
Show me one business which can turn profits while repaying a loan at 25 per cent interest.
We all know that credit is the lifeblood of business. But we have a banking sector that is content to offer only short-term overdrafts. Our development banks died long time ago.
Still, the move by Mr Midiwo was not for nothing. First, it forced former Finance minister Uhuru Kenyatta to negotiate with banks to restructure existing loans to some businesses.
The capital markets are yet to evolve into robust sources of long-term finance.
To steal the thunder from the populist bill, Mr Kenyatta got the Kenya Bankers Association to agree to short-term measures to alleviate the effects of high interest rates.
The banks agreed to extend tenure of loans. They agreed to cap increases in loan repayments at 20 per cent. They also agreed to waive early repayment charges.
Where the move by Mr Midiwo made an even bigger impact was in the amendments introduced at the committee stage.
Thanks to pressure by MPs, we are going to have a far improved corporate governance regime for the Central Bank of Kenya.
Yes, the majority of MPs only agreed to pass the Finance Bill because they voted with their stomachs.
But what has escaped us is the fact that in the process of passing the bill, a group of clever MPs managed to sneak in major changes.
We are now moving into a governance regime in which we will now have a separate chairman of the Central Bank of Kenya.
Until now, the governor also served as the chair of the Bank’s board. Critics said that the arrangement do not augur well for accountability.
I must say that I did not support the idea when it was first proposed by former Finance minister Amos Kimunya in 2007.
We made a string case in these columns about the case for retaining and upholding the independence of the Central Bank.
We pontificated on how a chairman of the board appointed by politicians would cause politicians to treat the Bank as just another parastatal and undermine the principle of autonomy.
The independence of the Central Bank makes a great deal of economic sense.
But from experience and recent developments, including the De La Rue saga, and the recent controversy over the volatility of the shilling, a strong case can be made for holding the Central Bank to account for its operations which have no bearing on monetary policy – including procurement and strategic planning.
This can only happen in a situation where the Central Bank has a strong board.
There was a time the positions of CEO at the Kenya Commercial Bank, Kenya Airways and the defunct Kenya Railways were held by executive chairmen.
We abandoned the arrangement because it makes the CEO prone to conflict of interest.
The MPs also sneaked in an amendment that stipulates that future governors will have to be appointed competitively and subjected to vetting by Parliament.
We will also have two deputy governors, both appointed competitively. The idea is to refocus and properly delineate the functions of the Central Bank by separating its monetary policy functions from things such as banking supervision and fiscal responsibility.
The amendments also require the Central Bank to cause banks to publish weighted average lending rates, interest rates spreads and their composition.
It will force banks to be more transparent in terms of revealing their costs. It is a smarter way of regulating interests rates.
Interest rate caps are an anachronism.