Dr Kamau Thugge’s exploits in steading the rocking Kenyan shilling have seen him named the Central Banker of the Year by the African Banker Magazine barely a year into his tenure at the Central Bank of Kenya (CBK).
The recognition follows interventions overseen by the CBK Governor to end the sharp depreciation in the exchange rate.
“Despite the challenges, during your tenure in office, you have successfully stabilised markets and instilled confidence in the Kenyan economy. The markets have responded by showing their faith and support for the Kenyan shilling, and the banking sector has demonstrated remarkable resilience, positioning itself as a true regional leader,” the African Banker noted in its citation of the award.
“The committee recognised your recent achievements as Central Bank Governor and recognised the strategic role the Central Bank is playing to address market failures and to help put the economy on the right footing to stimulate growth.”
Dr Thugge, who is just shy of marking a year in office, undertook several initiatives to put breaks on the exchange rate volatility including revitalising the foreign exchange interbank market.
The intervention saw the resumption of foreign exchange trading among banks leading to better price discovery for the local currency in the interbank deals.
At the same time, the CBK removed the 20 cents limit on bid-ask spreads on the interbank foreign exchange deal, ending one of the strict controls by the apex bank, which had led to a sharp divergence between the interbank and retail rates with the latter representing exchange rates offered by commercial banks to retail clients.
Moreover, the CBK has since the start of 2024 adopted a single exchange rate based on actual transactions in the interbank forex market ending a previous regime of parallel exchange rates.
The interventions saw the divergence closing towards the end of last year even as the Kenyan shilling continued to trade lower against the US dollar.
In December, however, Dr Thugge and CBK’s Monetary Policy Committee took the bold step of raising the benchmark interest rate to provide support for the local unit, a decision that drove local interest rates higher in contrast to rates in developed economies, a move that helped support new foreign inflows into the economy.
The CBK undertook two jumbo rate increases in December and February, raising the benchmark interest rate from 10.5 percent to 13 percent which served to bring in foreign inflows to the most recent infrastructure bond issue.
In February, the CBK would mark its biggest win in its battle to steady the Kenyan shilling under the partial buyback of Kenya’s debut Sh265.4 billion ($2 billion) Eurobond, which eliminated the risk of default by the government, a fear largely blamed for driving speculation against the Kenyan shilling.
The local unit has subsequently turned the corner since the partial buyback, posting year-to-date gains of 15.4 percent as of Tuesday this week with the shilling exchanging hands at Sh132.71 for the dollar in contrast to Sh156.98 at the end of last year.
While accepting the continental award, Dr Thugge noted the CBK remained keen on building on gains made from the reforms which have also anchored down inflation expectations and consumer prices.
“CBK will continue to build on these gains and reforms to safeguard macroeconomic and financial stability and support the government’s economic growth objective. With improved investor confidence and sustained macro-stability, we expect the economy to remain strong in 2024,” he said.
