MPs blame CBK governor for inflation, falling shilling

By Standard Team

MPs clashed with Finance Minister Uhuru Kenyatta over Central Bank of Kenya (CBK) Governor Njuguna Ndungu’s handling of Kenya’s financial crisis, inflation and depreciation of the Kenyan shilling.

Ikolomani MP Bonny Khalwale referred to Ndung’u as an "evidently incompetent" person unfit to hold public office, according to a past probe report. Gwasi MP John Mbadi accused the governor of sowing the crisis in the financial markets.

Khalwale on Tuesday claimed that Equity Bank has received preferential treatment from the Government occasioning it to accumulate "slush funds" to distort the financial markets.

Khalwale said Ndung’u should be sacked because he was implicated by the Cockar Commission in the irregular sale of the former Grand Regency.

But Uhuru said the governor will not be sacked because he has security of tenure and claimed Ndung’u never accused commercial banks of hoarding foreign exchange at the height of the inflation crisis.

Mbadi sought to know whether Stanbic Bank was guilty of hoarding foreign exchange, especially US dollars. Uhuru and Environment Minister John Michuki defended Ndung’u, alleging that the volatility in the financial markets had led to depreciation of the shilling and inflation had been largely caused by external factors, including the European debt crisis.

Uhuru said CBK had ordered interventions to save the shilling, which include restrictions of commercial banks’ export of foreign exchange reserves and disclosed that his ministry is negotiating with the International Monetary Fund to inject new money to stabilise the financial markets and shilling. But Mbadi said these interventions were flawed and accused Ndung’u of sabotaging any recovery with issuing conflicting statements when the depreciation crisis began.

Ainamoi MP Benjamin Langat dismissed the interventions as short term with no impact on long-term stability in the financial sector as Baiya demanded specific measures to cushion poor consumers from the high cost of life.

Mbadi said Ndung’u initially said CBK would not intervene in the markets only to accuse five commercial banks of hoarding US dollars thus weakening the shilling.

Khalwale said "Ndung’u has poor working relations with other stakeholders in the banking sector".

—Stories by David Ochami, Steven Mkwale and Alex Ndegwa.