Kenya’s President William Ruto nominated Kamau Thugge as the nation’s central bank governor, as he looks to boost an economy reeling from sticky inflation and a weakening currency.
(Bloomberg) — Kenya’s President William Ruto nominated Kamau Thugge as the nation’s central bank governor, as he looks to boost an economy reeling from sticky inflation and a weakening currency.
Ruto sent his decision to parliament, according to a statement from his office. If approved by lawmakers, Thugge will replace Patrick Njoroge, whose second and final four-year term as head of the Central Bank of Kenya expires on June 17.
READ: Meet the Contenders Vying to Become Kenyan Central Bank Governor
Thugge, 57, is a member of Ruto’s council of economic advisers. He served as the Treasury’s principal secretary from 2013 until 2019, when he was arrested following a probe into alleged irregular payments for a dam construction project. Thugge denied wrongdoing and the public prosecutor withdrew charges against him.
Thugge previously worked as a senior economist and deputy division chief at the International Monetary Fund. He obtained a masters degree and a PhD in economics from Johns Hopkins University.
With the new governor’s appointment, the top leadership of the central bank will be overhauled. In March, the lawmakers approved Ruto’s pick of Susan Jemtai Koech as deputy governor. Another deputy and a new chairman of the board of directors are set to be named to replace those whose terms are expiring too.
Currency, Inflation Pressure
The new governor will need to stabilize a currency that’s weakened about 10% this year, as part of measures to slow inflation that has been fueled by drought-fanned food prices and the cost of energy. The depreciating shilling has contributed to keeping inflation above the central bank’s target-range of 2.5% to 7.5% since June last year.
“From a market perspective, Thugge’s nomination sends all the right signals,” said Connor Vasey, Africa analyst at Eurasia Group. “A conservative economist who did his time at the IMF and who, while in treasury, pushed back against some unorthodox policies such as the now defunct interest rate cap.”
Kenya, like other African peers, has had to contend with domestic and external pressures, including the fallout from the coronavirus pandemic and Russia’s invasion of Ukraine. The risks contributed to monetary policy committee to increase the benchmark interest rate to 9.5% in March, compared with 7.5% in May 2022.
The International Monetary Fund forecasts Eastern Africa’s second-largest economy will grow 5.3% this year. The expansion slowed to 4.8% in 2022 from a revised 7.6% the previous period, according to the nation’s statistics agency.
The nation’s foreign reserves have dwindled over the past year, standing at $6.5 billion or adequate to cover 3.6 months of import cover as of May 11, according to information from the central bank.
Moody’s Investors Service last week lowered Kenya’s credit rating by a notch to B3, six levels below investment grade, putting it on par with Mongolia and Angola.
The ruling Kenya Kwanza coalition is a de facto majority in parliament, and is expected to approve Ruto’s nomination, according to Vasey. “But the vetting process will provide valuable colour on how Thugge intends to handle key monetary issues – particularly around exchange rate and hard currency management,” he said.
(Updates with analyst’s comments from seventh paragraph)
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