CENTRAL BANK OF KENYA
Points for Panel Discussion by
PROF. NJUGUNA NDUNG’U
GOVERNOR
GLOBAL FINANCIAL CRISIS
FORUM
Hilton Hotel, Nairobi
17th March, 2009

Governor’s Points for Panel Discussion – The Global Financial Crisis Forum – March 17th, 2009
The Workshop
The Central Bank of Kenya and the Kenya Bankers Association convened this
workshop bringing together seasoned players in various sectors of the Kenyan
economy as well as experts with international perspective on the Global
Financial Crisis in order to:
1. Understand the issues
2. Understand the risks
3. Understand the opportunities
4. Draw solutions – short-run, medium-term and long-term
5. Create a forum for a follow-up
Economic Activity
The Indicators are
1. Cement Production
2. Transactions in M-Pesa
3. 12 Year Infrastructure Bond – Large/small investors – dominated in bids
– (not value)
The conclusions drawn from these indicators are: Kenya has been resilient, it
has future potential, and the vibrancy is still there and will be stronger once the
risks of the global financial crisis are mitigated.
However, there are unresolved questions:
4. Liquidity (credit) is still an issue – but where is the problem:
a) - Credit Quantity Issue?
b) - Credit Pricing problem?
c) - Collateral Technology being used in banks/markets
d) - Market segmentation problems
e) - Intermediation inefficiency
5. The Inflation debate and computation of lending rates !
6. Regulation – geared to strengthen all banks
7. Misinterpretation of forex reserves question – They are supposed to
cushion shocks or contain market volatility

Governor’s Points for Panel Discussion – The Global Financial Crisis Forum – March 17th, 2009
The Global Financial Crisis Presents Three Generic
Challenges
1. Financial Sector Contraction – due to confidence–Risk averseness
(cid:1) Less resources mobilised – domestically/globally
(cid:1) But we can ring-fence domestic confidence and solve the resource
constraints – These are the solutions we need in this forum
2. Real Sector Economic Decline: Pose Significant Risks – from the global
side
(cid:1) But also Slow Adjustment
(cid:1) Production processes must be supported through public
investment - Protect wage goods
3. Public Sector Resource Constraints:
(cid:1) Buffeted by several shocks – Food is the most critical
(cid:1) Flexibility of adjustment - ODA/BoP support may be limited – but
it will come
Six Incremental Solutions
1. Partnership: make resources available to ride over shocks – BoP support
and quick disbursements in WB and AfDB
2. Domestic Resource mobilization strategies
(cid:1) Target to support production and Open up production potential
(cid:1) Avenue for investment & savings – see the IB Model of supplying
public infrastructure
(cid:1) Protect the wage good - consumption
3. Strengthen institutions and capacity in those institutions to focus on:
(cid:1) Appropriate policy given the global effects and Regulatory
institutions to take the lead
(cid:1) Provide a coordinating framework across regulators
(cid:1) Innovative policy strategies

Governor’s Points for Panel Discussion – The Global Financial Crisis Forum – March 17th, 2009
4. Stay the path of reforms – do not sacrifice long-run growth
(cid:1) Development budgets should not be cut – should be increased
(cid:1) Remain within attainable targets – growth targets, MDGs, etc
(cid:1) In the 1980s and 1990s – short-run shocks were used as an excuse
to cut Development Budgets – sacrificed long-term growth
5. Aid Delivery modalities in times of Crisis: Quick disbursements to allow
countries ride over shock quickly to protect economic erosion
(cid:1) But also DSA frameworks should signal changes in the policy
paradigm
6. Look at the global financial architecture