CBK Newsletter Keeping you Informed No. 6 A Central Bank of Kenya Publication Issue 2/ November 2013 • East African Payments System “Goes Live” • Cheque Clearing Cycle Reduced to One Day CENTRAL BANK OF KENYA VISION A World Class Modern Central Bank PRINCIPAL OBJECTIVES The Principal objectives of the Central Bank of Kenya (CBK) are: 1. To formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices; 2. To foster the liquidity, solvency and proper functioning of a stable, market- based, fi nancial system; 3. Subject to (1) and (2) above, to support the economic policy of the Government, including its objectives for growth, and employment. Without prejudice to the generality of the above, the Bank shall: y Formulate and implement foreign exchange policy; y Hold and manage its foreign exchange reserves; y License and supervise authorized foreign exchange dealers; y Formulate and implement such policies as best to promote the establishment, regulation and supervision of effi cient and eff ective payment, clearing and settlement systems; y Act as banker and adviser to, and as fi scal agent of, the Government; and y Issue currency notes and coins. CBK Newsletter Issue 2/November2013 CBKCBK NEWSNEWS 1 In this Issue 3 KenyaKenya ‒ readyready forfor ttake-offake-off ! 5 AKCP holds fi rst AGM 10 Central Bank and Government Securities 15 Role of the Market Leaders Forum 20 Sovereign Bond Issuance Editorial Board Reviewers Matu Mugo, Dr.Dulacha Barako, Patron Chris Gacicio, Isaya Maana Governor Photography Deputy Patron Deputy Governor Nathan Kiawa Chairman, Editorial Board Kimani Ndune Stephen Mwaura Design & Layout Editor Outbox Communications Samson Burgei The Editor welcomes comments and articles from Assistant Editor readers and stakeholders. Nancy Sang Contact us through: [email protected] Members The CBK Newsletter is published by the Communications Peter Gatere, Joyce Yego, Cappitus Chironga, Daniel Offi ce, Central Bank of Kenya, Haile Selassie Ave., Nairobi. CBK NEWSLETTER Ndolo, Kate Kittur, Dr. Roseline Misati, Evans Muttai, www.centralbank.go.ke Keeping you informed Samuel Tiriongo. CBK NEWS 2 Governor's Message Second, given that the effectiveness programmes to modernise the NPS. and efficiency of monetary policy These include cheque truncation, value transmission to the real sector is capping, and the GPay Project. These predicated on the level of financial initiatives have mitigated the risks development and stability, the CBK uses and increased the system’s efficiency its supervisory and regulatory policy with and effectiveness. The payments respect to the banking sector to achieve system infrastructure has been further this objective. A developed, strong and expanded to include the East African vibrant banking sector will support Payment System (EAPS) that went an effective and efficient monetary live on 25th November, 2013. This new policy transmission mechanism. system will facilitate trade in the region Specifically, the CBK uses its licensing using local currencies. and supervision tools, while creating Finally, as a fiscal agent of the new initiatives as an agent of financial Government, the CBK contracts development to ensure that the banking domestic debt in the market on system is solvent and efficient. The behalf of The National Treasury to adoption of risk-based supervision, in cover the financing requirements of line with international best practice, the Government’s budget. Since a has also been core to financial sector well developed financial market is stability. Continued reforms in the critical to achieving and maintaining financial sector have seen the sector stability in the debt market, the CBK expand to become more inclusive has been working closely with The Economic while maintaining stability, efficiency National Treasury and other players and integrity. In particular financial in the financial sector to deepen Management inclusion, supported by the mobile the financial market via the bond phone financial services platforms as market and the development of a yield Tools for well as the agency banking model, are curve. This has resulted in a notable now driving the growth of the banking increase in the average maturity of the Macroeconomic sector through increased mobilisation government’s outstanding securities of deposits by financial intermediaries, since 2003, when it was about four thus increasing access to financial Stability years, to stand currently at about services. The regular interaction onetary and fiscal policies are eight years. Furthermore, the market between the CBK and commercial the main drivers of economic is well diversified with benchmark and banks has also supported the stability Mmanagement in any economy. infrastructure bonds. A key outcome of the banking sector as it has provided In Kenya, the Central Bank of Kenya of all these is that the Government’s a platform for obtaining feedback from (CBK) has a variety of tools with which domestic borrowing programme has it implements policy. First, since the the sector as well as a forum for moral supported the deepening of the financial core policy mandate of the CBK is price suasion. The CBK is also working with sector with a variety of instruments. stability, there is a combination of direct the Kenya Bankers Association (KBA) It has also enhanced monetary policy and indirect tools to deliver the Central on coordinated initiatives to complete transmission and the coordination of Bank objectives that are consistent ongoing financial infrastructure monetary and fiscal policies. with the Government’s price stability developments and lower the cost of target and growth objectives. Price financial services. These drivers of economic management stability is a cornerstone for growth and have provided the base for the resilient enterprise development. A stable price Third, the CBK has been working closely economic performance witnessed in environment (or low and predictable with stakeholders in the financial sector the country in recent years through inflation) allows firms to plan their to develop a well functioning and stable sustained macroeconomic stability that production and commercial activities National Payments System (NPS). This presents a strong foundation for future with certainty. The current price stability is critical to the stability of the financial target requires that the 12-month overall growth. sector and macro economy. Since 2008, inflation rate should be 5 percent with a the CBK, in conjunction with KBA, fluctuating band of 2.5 percent on either side. has initiated and implemented various Prof. Njuguna Ndung'u, CBS CBK Newsletter Issue 2 /2013 CBK NEWS News 3 high level conference showcasing Kenya’s economic achievements Aand highlighting the country’s future economic potential was held at Kenya ‒ ready for Fairmont Norfolk Hotel, Nairobi from 17- 18th September, 2013. This conference , on “Kenya’s Economic Successes, Prospects and Challenges” focused on policy priorities that would enable Kenya achieve sustained and inclusive growth as part of its quest to take-off ! reach emerging market status over the next decade. The Conference, was themed ‘Kenya - Ready for Take-Off’ and was co-hosted by the National Treasury, the Central Bank of Kenya, and the International Monetary Fund and brought together about 200 participants from the Kenyan private sector, the international business community, civil society, the government and international institutions. “Kenya has a strong economy, which is modern in many aspects, but with even greater potential for expansion. We aim to strengthen and re-balance the economy by building all our strengths in traditional sectors while growing new sectors”, his Excellency, Hon. Uhuru Kenyatta told participants as he officially opened the conference. On her part, the Director of the African His Excellency, President Uhuru Kenyatta (centre) arrives at the Fairmont Norfolk Hotel, to open Department at the IMF, Ms Antoinette Sayeh the High Level Conference, accompanied by National Treasury Cabinet Secretary, Henry Rotich in her opening remarks, lauded Kenya on (left) and Principal Secretary, National Treasury, Dr. Kamau Thugge. her economic gains over the past few years, particularly coming as they have in a context in the ICT sector was acknowledged. The clearly demonstrated that monetary policy of global weakness and uncertainty. “Africa theme on “Harnessing Natural Resources for in Kenya works. However, it was noted that is moving forward, and the world is taking Growth” underscored the great potential and supply side shocks remain a challenge and note of its dynamism. Kenya is one of the challenges presented by recent discoveries in necessary measures including enhanced countries where Africa’s recent progress natural resources. It was agreed that there is buffers of food are critical, including the need is evident and where the opportunities for need for Kenya to choose appropriate fiscal for institutional reforms to ensure a smooth economic transformation and growth are regimes for mining and the petroleum sector. transition towards inflation targeting. manifest”, she said. The sub-theme on “Fiscal Priorities to Under the theme “The Financial Sector: Others who addressed the conference Support Growth” observed that Kenya has Shifting Gears” It was noted that financial were Cabinet Secretary, National Treasury, successfully managed its public debt in line innovation has increased inclusion and Henry Rotich; Cabinet Secretary,