Kamau Thugge – a former Principal Secretary of Kenya’s National Treasury – has resumed as the 10th governor of the central bank of Kenya. Thugge succeeds Patrick Njoroje as the leader of Kenya’s apex bank after Njoroje served as the bank’s governor for two four-year terms.
Kamau Thugge’s illustrious career is detailed in a press statement released by the Central Bank of Kenya. Aside from serving in various capacities in Kenya, the new governor previously “worked in the International Monetary Fund (IMF) in both policymaking and non-policymaking departments.”
The statement adds that Thugge contributed to designing the Highly Indebted Poor Countries Initiative (HIPC) alongside other policy endeavours spearheaded by the IMF. During the Global Financial Crisis, he was Mission Chief to two South African countries – Lesotho and Botswana.
The only blemish on his career is the corruption case involving him and some other officials in 2019. Thugge was accused of planning to misappropriate Sh55 billion by moving forward with a deal to build two dams (Arror and Kimwarer) without approval. The charges against Kenya’s new central bank governor were dropped when he agreed to testify against the former finance minister – Henry Rotich in 2021.
Tough times are ahead for Thugge
Upon resumption of duties, Thugge will now attempt to tackle Kenya’s economic woes. This won’t be an easy task, considering the current situation. Even Njoroje in a farewell address shared on Twitter notes “perilous times lie ahead, but how different the voyage.”
Kenya’s public debt has continued to rise, causing the delay in the payment of salaries of civil servants and the shilling continues to weaken against the dollar. Inflation for May 2023 was 8%, 3% shy of the central bank’s target. Following the removal of subsidies on petroleum and maize last year, the prices of those commodities have shot up. This has prompted protests by citizens many times already this year.
The Ruto-led government has also introduced a now-controversial Financial Bill which seems to increase taxes for various sections of Kenyans as part of efforts to fund its Sh3.68 trillion budget. Despite being openly criticized by the opposition, a fresh slew of tariffs is expected to take effect next month.
Interestingly, the new taxes also affect Kenya’s fast-rising digital economy. While content creators like social media influencers face a 5% withholding tax on their gross profits, the Bill also introduces a 3% digital asset tax which affects transactions involving cryptocurrencies and the like.
Another duty that millions of Kenyans will expect Thugge to fulfill will be to make decisions independent of political sentiment. This could be tricky considering that Thugge was, until recently, a Principal Secretary at the National Treasury.
Meanwhile, Thugge isn’t expected to go against the CBK’s current stance on central bank digital currencies (CBDC). Although the bank claimed that the hype was gradually fading, it pledged to study other countries’ steps toward adoption to see whether the potential benefits have been attained.
Nigeria became the first African nation to launch a CBDC. Unfortunately, the adoption rate has been “disappointingly low”, as described by the IMF. However, the country is experimenting with new methods to encourage usage. The Central Bank of Nigeria recently unveiled eNaira as a payment option for diaspora remittances.
Time will tell
Kenya, like other African countries, suffered great economic losses thanks to COVID-19. Furthermore, the African Development Bank (AFDb) claimed that the current Russia-Ukraine war “triggered a shortage of about 30 million tons of grains on the continent, along with a sharp increase in cost.”
It’s quite early to predict the outcome of Thugge’s tenure, but many Kenyans will be hoping that he puts his local and international experience to good use and revive the country’s economy. Njoroje claimed to have left behind an institution set to attain a “world-class modern central bank” status.
Let’s see what Thugge makes of it.
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