the hipc initiative. the overriding fiscal thrust of the government, is to contain the stock of debt to a sustainable level of 40 percent of gdp. debt sustainability analysis carried out by the ministry of finance, the imf and the world bank have not found any significant risk posed by our debt levels. to demonstrate this commitment of reducing the domestic debt, the government will reduce its domestic borrowing from 5. 1 percent of gdp in 2009 / 10 to 3. 8 % in 2010 / 11. this fiscal space, as was demonstrated during the drought and global financial crises is important for propelling growth even in times of crisis – the fiscal stimulus would not have been possible – gives room for monetary policy to perform. 6. it is the central bank ’ s belief that the fiscal and monetary policies currently in place will enhance investor confidence by increasing expectations of economic recovery or reducing tail risks associated with the exogenous shocks that have buffeted kenya ’ s economy in the recent past. in particular the government expenditure programs and the current monetary policy stance are likely to have larger than normal positive impacts on demand and benefits that may persist for a significant period of time. 7. for us in the central bank, our pre - occupation is to align monetary policy with the growth and development goals while at the same time maintaining low and stable inflation – a target of 5 %. in addition, a stable and market driven exchange rate, increased efficiency in the financial system, financial stability, and a reliable and efficient national payment system. to give you some indication : inflation was provisionally 3. 2 percent for the month of june 2010. inflation expectations as indicated in the mpc market surveys are anchored at a lower level. the current exchange rate movements of the kenya shilling against other major currencies is largely a response to external developments especially the uncertainty in the euro zone market. the exchange rate in this case works as an automatic stabilizer via relative price movements. interest rate structure that carries with it cost of investment as well as inflation expectations have declined drastically since the middle of 2009. distinguished members, ladies and gentlemen 8. let me note that the current economic environment in kenya is based on policies that are market leaning and offer a level playing field for potential investors. 9. in the banking sector, our vision is to build a strong financial sector and be the financial hub of the east african community. the strength and presence of kenyan banks is now being felt in the region, specifically within the east african community where some of our

bills, building and safeguarding strong institutions and moving fast on fatf deficiencies. the fourth dimension is that kenya had to go to war to fight terrorism ; this is beyond financial risks but also national sovereignty. we need : ( a ) time to finalize all these interlinked issues. ( b ) capacity building support. ( c ) to adopt, replicate and build a strong frc and the best model in the world. bis central bankers ’ speeches and with these kenya will succeed. whilst the focus of this forum today will be to raise awareness and sensitize you on upcoming programs on issues surrounding aml / cft, allow me to briefly touch on a number of initiatives that have been undertaken by the central bank to address some of these issues. ladies and gentlemen ; the central bank of kenya is mandated to foster the financial integrity of the financial system in the country. the bank has continually enhanced the regulation and supervision of the financial system in order to improve the sector ’ s integrity. as part of our efforts in ensuring appropriate and effective oversight, the central bank first issued aml guidelines in 2000. these guidelines were revised in 2006 and are currently in the process of being reviewed to reflect the prevailing international best practice and to align them with the proceeds of crime and anti - money laundering act, 2009 ( pocamla ). over the last two years, the central bank has issued regular aml / cft guidelines to financial institutions to further support and enhance the implementation of pocamla. the guidance has covered various issues such as the operationalization of the aml act, suspicious transaction reporting and measures to be adopted by financial institutions to combat the financing of terrorism. the central bank has also revised the forex bureau guidelines so as to align these guidelines to pocamla. on the microfinance front, the microfinance regulations and the agency guidelines require deposit taking microfinance institutions and their agents to implement aml / cft measures. all these measures are aimed at ensuring the integrity of the financial sector. as you may be aware, kenya is now a leading light in financial inclusion. the systems and practices we have put in place to deepen financial inclusion are now considered as acceptable best practices and are being emulated by other jurisdictions. the challenge before us on this front is to maintain the delicate balance between financial inclusion and financial integrity. by putting in place the required measures to address money laundering and terrorism financing in the financial sector while at the same time deepening our financial