CENTRAL BANK OF KENYA
19TH ORDINARY MEETING OF THE MONETARY AFFAIRS COMMITTEE (MAC)
Melia - Kempinski Hotel- Zanzibar, Tanzania
Remarks by Dr. Patrick Njoroge
Governor of the Central Bank of Kenya
August 21, 2015
As Prepared for Delivery
As the newest member of this club, I would like to extend my sincere appreciation to Governor
Beno Ndulu and the entire management of the Bank of Tanzania for the excellent organization
and hospitality extended to me and my delegation. I am greatly honored to be a part of this
dedicated team of management of central banks in the EAC. It is a pleasure for me to be here.
You command a great reputation for astute leadership in central banking, especially in
harmonizing functions, related processes and systems, directed towards the establishment of the
East African Central Bank. But first things first.
As regards the business of today, I would like to commend you, for the various activities you
have initiated under the auspices of the Monetary Affairs Committee (MAC) to support the EAC
integration process. I take note that MAC has made commendable progress, particularly in the
last decade, in harmonizing monetary policy frameworks, macroeconomic statistics, monetary
and exchange rate operations, rules and practices governing bank supervision and national
payments systems and financial reporting practices. This clearly demonstrates commitment and
dedication of MAC in delivering its core mandate of enhancing monetary and financial
cooperation in the EAC as a prelude to the establishment of the EAC monetary union (EAMU).
We must build on these successes to move the EAC integration agenda to the next level.
Experience from other parts of the world, especially the Euro zone has shown that the road to a
monetary union can be long and bumpy. It calls for adequate preparation, commitment and
unwavering support from all stakeholders and more importantly, the political will of the Partner
States. This must go hand- in-hand with public education and awareness creation to entrench
the spirit of integration and enhance ownership of key programmes and activities among East
African citizens.
In this regards, Central Banks must remain steadfast in delivering on their key mandate. They
will collaborate with other stakeholders to ensure key ingredients of a monetary union are put in
place within the timelines provided in the Road Map for EAMU. The critical milestones to this
process include: attainment of macroeconomic convergence during the transition period,
harmonization of policy, legal and regulatory frameworks, convertibility of the regional
currencies and establishment of necessary institutions responsible for the implementation of the
EAMU Protocol. As you are aware building capacity is a necessary adjunct and complement to
this process; it ensures that Central Banks have the critical mass to undertake preparatory work
for the monetary union. We therefore will prioritize our activities to ensure MAC programmes
remain focused, time-bound with clear responsibility and measurable indicators. In turn, regular

consultations and interactions, at times necessitating changes in rules of engagement and
innovative solutions are unavoidable.
Since April 2015, EAC currencies have experienced volatility arising mainly from developments
in the global currency markets as well as widening current account deficit in the balance of
payments. While the severity of the impact has varied country to country, the trend towards a
worsening is conspicuous. We may want to recourse to a coordinated approach at the regional
level to restore stability in the FX market and to contain second round effects on domestic
inflation. The healthy buffer at the beginning of the year is now but gone. But are we clear
regarding the channels of transmission and the magnitude of the effects? Which is the best line
of defence...solo interventions at the bank level or a coordinated approach? What lessons can
we draw on interventions and organization towards addressing the exchange rate volatility
experienced in the 4th Quarter of 2011? At what level, besides the trend, for the short term
money market interest rates? The recent upward trend and volatility of the interbank rate,
seemingly with an own life, has frustrated implementation of monetary policy, producing daily
changes beyond reasonable conjecture.
The expected normalization of monetary policy in the US and the Euro area is still a grey patch
on the economic horizon. But with what impact? I have no clear answers to these questions.
Digging in the relevant past experience (more on attitude than actions) and thinking out of the
box may help. We are here to dream available options. I wish to commend our technical staff for
working tirelessly over the past few days to produce a very comprehensive report. With purpose
and a common vision, I also extend appreciation to the EAC Secretariat for their support in
MAC activities.
Dear colleagues, I assure you of the Central Bank of Kenya’s commitment to the
implementation of the EAMU protocol and its road map. With these few remarks, I look forward
to a fruitful engagement in discharging the agenda for this meeting.
Thank you.