on our part as the central bank, we will continue to play our supervisory role effectively, and ensure that we monitor very closely compliance with cis reporting requirements, given that sharing comprehensive information on a timely basis is the only way this mechanism can reach its full potential. it is important to note that central banks are also beginning to explore effective use of credit information to strengthen banking supervision. i am informed that the bank of mexico offers a useful case study that will be discussed in the first session of this conference. it is important that central banks invest in the analytical skills needed for effective utilization of the data for supervision and monetary policy. i wish you all very fruitful discussions as you share experiences that will shape the future of cis in kenya, africa and beyond. it is now my distinct pleasure to welcome cabinet secretary henry rotich to officially open the conference. karibu bwana waziri! thank you. bis central bankers ’ speeches

njuguna ndung ’ u : economic and financial developments in kenya speech by prof njuguna ndung ’ u, governor of the central bank of kenya, at the luncheon with members of the eastern africa association, nairobi, 21 january 2009. * * * the chairman eastern africa association, members, distinguished guests, ladies and gentlemen ; let me first thank the chairman of the association for this opportunity to share my experiences with economic performance, the conduct of monetary policy in 2008, and the perspective for 2009. the experiences of the central bank have been vast but i will deal with economic performance and policy directions in three topical areas : • the conduct of monetary policy and monetary policy decisions • economic growth outlook • the global financial crisis and kenya ’ s economic performance a. the conduct of monetary policy in 2008 the past year has been a difficult one both from a local and global perspective. for monetary policy at the central bank of kenya ( cbk ), three challenges emerged ; • liquidity management in the economy ; • inflation upsurge ; and • exchange rate volatility these challenges tended to take monetary policy management to unfamiliar territory. in order to ensure price stability or fight inflation, the cbk relies on indirect instruments that affect liquidity in the economy and so the stock of money, which in turn affects interest rates and prices in the desired direction. the debate on what are the targets and what instruments to achieve the targets is relevant. money supply growth was maintained within the target range for most of the months in 2008. ( i ) liquidity management in the economy the role of a modern central bank is in general price stability, that is to fight inflation. however, for the central bank of kenya, stability of the financial system is equally important, so is the national payments and settlement system. the bank implemented the first two objectives with varying degrees of success. while inflation was high we also faced downside risks to financial stability from the safaricom ipo. the size and nature of the ipo led to large shifts in liquidity, and the unwinding process would no doubt have had longer term impacts on economic and financial variables if not properly managed. the offer attracted ksh231 billion. liquidity was skewed in favour of a consortium of banks despite the mitigation mechanisms put in place by the banking system. the bank ’ s approach to this therefore was to mop up excess liquidity from the banking sector using the term auction deposit and repos