Treasury, CBK succession race hots up as Ruto takes over

Entrance to Treasury Building. [Denish Ochieng, Standard]

Naming the National Treasury CS is among the first critical decisions that President-elect William Ruto will make after being sworn in today, experts say. 

This is as the race to select successors to Central Bank of Kenya (CBK) Governor Patrick Njoroge and his deputy Sheila M’Mbijjewe, whose terms end in June next year, intensifies. 

A former banker in one of Kenya's largest commercial lenders is believed to be among the frontrunners for the CBK job, The Standard has learnt.

The expected changes at the two institutions which preside over Kenya's finances and monetary policy come amid uncertainty over the country's fragile economy and inflation outlook.

Former CBK and Treasury officials told The Standard yesterday that the new Treasury boss will require long-term experience to effectively steer an economy battered by the Covid-19 pandemic, rising food and fuel prices fuelled by the war in Ukraine, the worst drought in four decades and soaring public debt.

"This (Treasury docket) is a policy leadership position with diverse dockets from economic planning to development policies, fiscal policy, investment, monetary policy and all that," said former CBK Governor Njuguna Ndung’u.

"A bachelor's degree in economics and experience will be required. In addition, it is also a political appointment."

The economy was the top issue for many voters in the elections piling pressure on the Treasury CS appointee to hit the ground running in addressing the cost of living.

Analysts said yesterday that high on the next Treasury CS's to-do list is public debt management and arresting the runaway cost of living.

Thrifty diplomat

Outgoing Treasury Cabinet Secretary Ukur Yatani's successor must be a thrifty diplomat. He comes into office at a time the incoming administration faces significant public pressure to ease some of the taxes and expand social spending while limiting fresh public borrowing amid huge debt repayment obligations, the analysts added. 

Since 2013, public debt accumulated by President Uhuru Kenyatta's government has risen by Sh7 trillion. The loans – which include billions of dollars from China – are pushing against the nation’s debt ceiling.

The huge debt burden is expected to constrain the next administration’s spending capacity and requires some delicate diplomacy with countries such as China and Japan and multilateral lenders like the International Monetary Fund (IMF) which hold hundreds of billions worth of Kenya's debt. 

The IMF already wants the new government to continue cutting the budget deficit by growing tax revenues and curbing wasteful expenditure as debt levels near the allowed Sh10 trillion limit.

Deepak Dave, an analyst at Nairobi-based Riverside Advisory, said the debt burden is a priority. "Nothing else really matters because fiscal, monetary, currency, tax, growth, and employment policies all intersect at one place".

"What can the government afford to fund? Without a clear plan for debt reduction, everything else is just a promise," said Dave. 

Pile pressure

The move is set to pile pressure on the new administration, which has to rely on the IMF for financial support.

President Kenyatta appointed Dr Njoroge for a second and final four-year term as CBK governor in 2019.

The president also renewed the terms of M’Mbijjewe and CBK board chairman Mohammed Nyaoga.

Dr Njoroge, a former IMF adviser, assumed the governor’s office in 2015 amid a currency slump and inflation risks.

Under his reign, inflation has largely remained under check averaging at 6.2 per cent over the period within the government’s target band of 2.5 per cent -7.5 per cent until recently when it breached the upper limit.

Inflation jumped to a five-year high last month to 8.5 per cent fuelled by a surge in the price of foodstuffs such as bread and essential items like wheat flour, cooking oil, food, fuel and soap, squeezing household budgets and demand for goods and services.

Dr Njoroge’s entry into CBK spawned the emergence of a new order for financial institutions.

Banks have come under the heat of enforcement of banking rules under the Yale-trained economist’s reign.

In 2019, Dr Njoroge presided over the long-awaited and controversial printing of new-generation banknotes in line with the Constitution despite criticism from some quarters.