Challenges Ahead as Kamau Thugge Takes Over At CBK

One of the first items that the new Central Bank of Kenya(CBK) Governor Dr Kamau Thugge will have to confront as he takes over his corner office, located on Haile Selassie Avenue, is how to deal with powerful and politically connected commercial banks and dealers suspected to be engaged in speculative activities in the foreign exchange market.

Despite his illustrious and tenacious reign at CBK, former Dr Patrick Ngugi Njoroge found stabilization of the Kenya Shilling against the US dollar and other international currencies, a constantly moving target.

Also on the plate of the new CBK Governor is how to tame Kenya’s rising public debt, which is now approaching the KSh 10 trillion cap and how to balance between lowering the level of foreign borrowing as is being pushed by the Kenya Kwanza economic blueprint and ensure that Treasury does not crowd out the private sector from the domestic market through excessive borrowing from the local money market.

Thugge faced with a rapidly depreciating Kenya Shilling Exchange rate against the US Dollar

It will also be interesting to watch how Thugge navigates the CBK as an independent monetary authority, devoid of any political influence, given his previous background as a powerful Permanent Secretary at the National Treasury and his close connections with the Kenya Kwanza administration.

In a rapidly changing technology space and with the emergence of crypto assets and digital cash, Thugge will be expected to pick up from his predecessor, who put brakes on the issuance of a Central Bank Digital Currency, until the CBK does due diligence and study its implications.

It will be recalled that his predecessor Dr Patrick Njoroge threw holders of these digital assets under the bus, terming the currency as illegal and warning those dealing in cryptocurrencies that they were on their own-without any CBK cover, support or backing.

In one of his exit interviews with the media, former CBK Governor Dr Njoroge maintained his stance that the CBK has prioritized the issuance of a digital currency but that it is still closely monitoring developments in this space before taking any plunge into the uncertain waters.

While the CBK has been pussyfooting, the neighbouring Tanzania’s central bank is said to be speedily working on a phased introduction of a digital currency. If their experiment is successful and risk-free, the Central Bank of Kenya finds itself in the unfamiliar territory of playing catch-up.

As Dr Thugge settles down at CBK, the focus will shift to the tools that the Monetary Policy Committee(MPC), the top policy-making decision of the CBK will use to tame runaway inflation in the light.

Dr Kamau Thugge becomes the CBK’s 10^th Governor and is expected to deploy his long and distinguished career in the international and Kenyan public service.

His previous engagements include at the International Monetary Fund (IMF), where he is credited with designing the Highly Indebted Poor Countries Initiative (HIPC). He has also worked on various Article IV missions including Mission Chief to Botswana and Lesotho during the Global Financial Crisis.

Dr Thugge has also previously been Head of the Fiscal and Monetary Affairs Department at the National Treasury, Economic Secretary and Senior Economic Advisor, Principal Secretary at the National Treasury, and Senior Advisor to the President and Head of Fiscal and Budget Affairs, prior to the current elevation as CBK Governor. Dr. Thugge helped to design and implement various laws including the Public Finance Management Act, the Commission on Revenue Allocation Act, the Independent Officers (Appointment) Act, the Public Procurement and Disposal of Assets Act, and many more.

Dr Thugge has also sat at various boardrooms including that of the CBK, the Monetary Policy Committee, the Kenya Revenue Authority(KRA) and the Capital Markets Authority(CMA).