Economy
‘Gentleman’ muddied by dam scandal set to take over CBK top job
Tuesday May 16 2023
Kamau Thugge was among the six candidates shortlisted in race to replace Dr Patrick Njoroge as CBK Governor. He has been nominated to succeed him. FILE PHOTO | NMG
In under three years, Kamau Thugge has moved from a key suspect in the Kimwarer and Arror dams scandal to a State witness and an economic adviser of President William Ruto before being nominated to become the tenth governor of the Central Bank of Kenya (CBK) in one of the rarest comebacks for a senior public servant in recent times.
If cleared by Parliament, Dr Thugge will be back in pole position to drive President Ruto’s economic agenda in the next four years and will replace Dr Patrick Njoroge who has had a rough run in the last months of his tenure battling the twin problems of a depreciating currency and runaway inflation.
On Monday, the State House announced the nomination of Dr Thugge, thrusting the former Treasury Principal Secretary into the middle of the country’s economic and financial storm.
The first order of business for the economist, who is the senior adviser and Head of Fiscal Affairs and Budget Policy at the State House will be to align President Ruto’s bottom-up agenda, which includes expanding credit to the millions in the informal sector, using the Hustler Fund.
Read: President Ruto nominates Kamau Thugge for CBK governor
Dr Thugge, who is making a comeback after being thrown out of the National Treasury under a cloud of corruption charges, was cleared of any wrongdoing in 2021.
But the case against his former boss, Henry Rotich, who was the Treasury Cabinet Secretary, is still ongoing.
Dr Thugge will also be expected to calm the nerves of investors following complaints of dollar shortages that have seen the shilling exchange at a record low of 137 by the close of business on Monday.
The nominee is said to have narrowly beaten Haron Sirima, the Director-General at the Public Debt Management Office at the Treasury, to the job, according to sources from State House.
“His Excellency Hon. William Ruto Samoei Ruto, PhD, C.G.H., President and Commander in Chief of the Kenya Defence Forces, has, on the recommendation of the Public Service Commission, nominated Dr Kamau Thugge, CBS, for appointment as the Governor of the Central Bank of Kenya (CBK),” said Felix Koskei, the head of Public Service, in a statement.
Dr Njoroge, who has been at the CBK since June 19, 2015, is statutorily ineligible for reappointment, added Mr Koskei.
Besides overseeing the monetary policy at the CBK as the chairperson of the Monetary Policy Committee (MPC), the Governor also ensures that banks are financially healthy by diligently observing certain prudential guidelines.
Under the watch of Dr Njoroge, three banks — Dubai Bank, Imperial Bank and Chase Bank — collapsed, with his critics accusing him of high-handedness.
Dr Njoroge has countered this by arguing that these lenders were engaged in financial malpractices.
One of the highlights of Dr Njoroge’s two terms has been a frayed relationship with banks, partly due to the need for him to maintain an arm’s length relationship with the institutions he is regulating, but partly also due to sheer aloofness.
Bank executives, who have never had a chance for a chit-chat with the outgoing governor, will be watching closely what kind of personality Dr Thugge brings to the CBK’s corner office.
Dr Thugge, who spent most of his adult life in the United States, first studying economics in American universities and then working at the IMF, is a soft-spoken scholar that does not mind an invitation to a social event in the evening after a hard day’s work.
Samuel Nyandemo, an Economics lecturer at the University of Nairobi, agreed that Dr Thugge has a solid grasp of the country’s monetary and fiscal affairs.
“And he has a wide spectrum of experience in macroeconomics,” said Dr Nyandemo.
“Nonetheless, we have not forgotten the dam scandal,” added Dr Nyandemo.
It is not just the scandal around the Arror and Kimwarer dams that are likely to haunt Dr Thugge but also the issuance of the country’s first Eurobond whose paper trail the Treasury did not explain well to the public.
Dr Thugge, and other government officials then, insist that no money was lost during that period.
And now, coincidentally, Dr Thugge will be one of the State officials that will be tasked with raising another Eurobond to repay the debut one of $2 billion.
Dr Thugge defended the Planning Ministry after an audit of the Eurobond funds established that the billions raised could not be accounted for with spending having occurred outside the Integrated Financial Management System-IFMIS.
He insisted the funds were fungible and went into one pot, a position vindicated by the then Auditor General Edward Ouko.
The payment of Kenya’s first Eurobond is expected in June next year.
The CBK Governor, who is the chief executive officer of the country’s apex bank, serves a four-year term and is eligible for one additional term.
The Governor MPC, one of the highest decision-making organs of the bank, regulates the amount of money circulating in the economy.
Dr Thugge, who served as the Treasury PS between 2013 and 2019, will also be tasked with helping to bring down the cost of living and ensuring that the interbank forex market is successful.
He was forced out of his position at the Treasury over his alleged role in the multi-billion Kimwarer and Arror dams’ construction in Elgeyo Marakwet.
He has previously worked in the Finance ministry as head of the fiscal and monetary affairs department and has served in other senior positions such as senior economic adviser and economic secretary.
Prior to joining the Treasury, Dr Thugge worked with the IMF as a senior economist and deputy division chief.
The stint makes him a favourite of the Bretton Woods institutions that interact regularly with the Treasury and the CBK in matters of multilateral development financing as well as in monetary and fiscal policy formulation.
His appointment, however, risks drawing criticism from independence hawks who insist that the CBK governorship should be the office that dispenses its obligations objectively with little interference from external interests.
Read: The scorecard of CBK governor
His appointment comes at a time the country is grappling with a myriad of financial issues, including high inflation, and the weakening of the Shilling amid a credit crunch.
