NAIROBI, Kenya, Jan 30 – The ad-hoc Parliamentary Select Committee on the Depreciation of the Shilling has said that a report on what could have caused the local currency to rapidly lose value between October and November last year will be ready by Monday next week.
The committee led by chairman Adan Keynan will also highlight its recommendations to Parliament on how to avert such an occurrence in future.
“We have done a lot and by the end of this week latest Monday we want to have the report out that will be based on the information that we have collected,” said the chairman.
The team has been holding sittings since November last year to try and understand why the Central Bank of Kenya (CBK) failed to rein in the depreciation of the shilling which touched a historic low of Sh107 to the dollar.
Several theories such as currency speculation, internal shocks to the economy and internationally induced factors have been advanced as to what could have triggered the shilling’s free fall but the committee is convinced that the problem did not stem from market fundamentals.
The team believes that CBK Governor Prof Njuguna Ndung’u ‘slept on the job’ and as such needs to take responsibility.
“We have had the sugar cartels; the oil cartels and now the foreign exchange cartels and it is because of this that we have decided to put our foot down and get the real causes and assist the public in terms of getting new policies; in terms of punishing the real culprits and making sure that those who slept on the job exit from public offices as soon as possible,” Keynan said.
The views he held were informed by the suffering that many Kenyans have been subjected to since the shilling’s fall that brought with it soaring interest rates.
Keynan spoke when the team hosted Equity Bank Chief Executive Officer James Mwangi to shed more light on the phenomenon that many believed was caused by speculative activities by major banks.
Although it is the most profitable bank in the industry and has the largest customer base with 7.5 million customers, Mwangi explained that they were not a major player in forex trading and could not have contributed to the local unit’s dip.
“We are not active in forex transactions… for the whole of last year, our equity forex holding as a percentage of national reserves was almost zero. It has either been 0.01 percent or 0.03 percent and was consistent throughout the year,” he argued.
He explained that contrary to reports, the bank has neither received a warning letter from CBK cautioning it of engaging in speculation nor have their (forex) transactions been suspended by the regulator.
In addition, Mwangi said they did not have impromptu visits by Central Bank officials who at some point were conducting audits on banks that were suspected of employing under-hand tactics and taking arbitrage profits.
Mwangi also vehemently refuted claims that he could have influenced the governor, who’s also the Monetary Policy Committee chairman not to take act in time to provide Equity and other players to continue making profits.
In his defence, the CEO argued that such information could have been released by their competitors who are not happy with the success of an indigenous firm like Equity and urged the committee to disregard such reports.
Earlier on Monday, the Select Committee had issued summons to Governor Ndung’u to appear before it on Tuesday at 2.30pm. The issuance of the summons had been necessitated by the governor’s failure to honour two previous appointments.
The committee stood down a team from the CBK’s Anti-Bank Fraud Department which Ndung’u had sent in his place saying he was opening a workshop.
According to Article of the 125 Clause (2) Parliament and any of its committees has the same powers as the High Court to enforce the attendance of witnesses and examine them on oath, affirmation or otherwise.
The committee members said they were not satisfied that the governor will look into the practices of the CBK to see if meets global practices.
The parliamentary select committee further directed Ndung’u to submit all correspondences he issued with banks between March and November last when the rate of inflation was on the rise.