Central Bank of Kenya (CBK) cancelled a currency-printing contract with De La Rue without any official communication from the Cabinet.

Governor Njuguna Ndung’u told the Parliamentary Accounts Committee (PAC) that the institution acted on a letter by the former Finance Minister Amos Kimunya, which indicated that the Cabinet had made the decision to cancel the 2006 contract to print some Sh1.71 billion pieces of currency.

“CBK never received any communication directly from the Cabinet but acted on what the then minister told us. The letter by the minister cited a Cabinet decision,” said Ndung’u.

He said the bank implemented the directive communicated through a letter dated September 24, 2007, which advised CBK that “the Cabinet had approved a Joint Venture between the Government and De La Rue”.

Prof Ndung’u could not ascertain whether or not the Cabinet made such a decision.

The governor told the committee chaired by Ikolomani MP Boni Khalwale that the cancellation was followed by a notification issued on November 1, 2007 to the effect that the contract for the printing of new generation banknotes stood cancelled.

The committee is probing the cancellation of the contract to print the Kenyan currency in Malta in which it is suspected that the State lost over Sh2 billion.

The governor, however, was unable to explain how CBK, which is an independent body, acted on directives of the minister, who was not party to the contract, to cancel the same.

Khalwale wondered how Kimunya would have directed the bank to cancel the contract when the Head of Public Service and Secretary to the Cabinet is the one mandated to communicate decisions made by the Cabinet.

“Kimunya himself told us that there was no such Cabinet meeting to discuss cancellation of the contract with De La Rue. He told us that the Cabinet simply discussed the issue of a Joint Venture with De La Rue and I wonder where he derived such powers to cancel a contract Treasury was not party to,” said Dr Nuh Nassir, a member of the committee.

Ndung’u, said the idea of printing the currencies in Malta was not wise.