njuguna ndung ’ u : initiatives, developments and achievements of the kenya government securities market remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the launch of the ftse - nse kenya government bonds index, nairobi, 3 october 2012. * * * the chairman of the nairobi securities exchange ( nse ) ; chief executive, nse, mr peter mwangi ; officials of the ftse group ; capital and financial market executives ; members of the media ; ladies and gentlemen : at the outset let me thank the nairobi securities exchange chief executive for inviting me to participate in this auspicious moment of the launch of the ftse - nse kenya government bonds index. this achievement is indeed critical for the development of a robust domestic financial market in kenya. today ’ s event comes at a time when we as market players take pride in the success of our efforts in spearheading market development. this collaboration among market players has been instrumental in developing one of the fastest growing bond markets in africa as the kenyan bond market is ranked among the top in africa. ladies and gentlemen : let me take a few minutes to make some remarks on the initiatives and developments that have underlined the achievements of kenya government securities market. over the last one decade, the central bank of kenya in liaison with stakeholders in the financial sector has contributed significantly to the following successes : 1. longer maturity profile of domestic debt instruments : average maturity profile of government securities rose from 8 months or ratio of 76 : 24 in treasury bills to bonds in june 2001 to 5 years 5 months or ratio 20 : 80 currently. with a well - functioning secondary bond market in place, the government no longer faces rollover risks associated with short term debt instruments. 2. benchmark bonds implementation : successful implementation of treasury bonds benchmarks and reopening to increase their liquidity since april 2009 was a critical step towards addressing the bond market fragmentation problem and in the development of a reliable yield curve in our market. about 16 benchmark bonds have so far been reopened bringing into the market more than ksh. 138 billion and providing critical financing for the national recurrent and development budget as per government ’ s fiscal policy. 3. project - specific ( infrastructure ) bonds – the government of kenya took a bold step in february 2009 to issue the first project / sector specific bond with an aim to fund key infrastructure projects and set pace for public, private as well as supranational agencies

. ladies and gentlemen, to be sure, our institutions will not become perfect, and their improvement is a permanent process of trial and error. disagreement is a natural human feature, and concerns will be understandable when put into context ; therefore, our workshop will be ready to openly address skepticism as well. we believe that national central banks like the oenb have a responsibility to encourage debate that goes beyond the deliberations of policymakers. not every aspect of the emu reform project that will be discussed during the next two days may seem realistic for the immediate future. in this context, i would like to say a few words about the timing and sequencing of this very important reform project. in particular, i would like to caution against those voices arguing that emu needs to be fundamentally re - built, or even re - established from scratch, within the next two years and arguing that „ otherwise it will fail “. this argumentation, in my view, is extremely dangerous as it puts our already substantial achievements of the past years at stake. offering a contrasting perspective, i would like to recall sir karl popper ’ s piecemeal approach, and strongly argue for a step - bystep approach. as you may know, also the five presidents ’ report prudently envisages two different stages toward completing emu. in a first step, changes would build on existing instruments and make the best possible use of the existing treaties, thus increasing their probability of being implemented in practice. only in a second stage, in a rather long - term perspective, the five presidents ’ report proposes measures of a more far - reaching nature, requiring fundamental treaty changes. we should keep in mind that these days the political feasibility of substantial changes to the treaty seems rather limited, as it is not even clear bis central bankers ’ speeches how many members the eu might comprise in two years from now and as every single member state may veto a suggested treaty change. thus, unrealistic reform proposals cannot be seen as constructive contributions to the project but are rather politically and psychologically dangerous. to put it in the words of ecb board member benoit coeure, “ the eu is a union of democracies and it should be more trustful of the power of democracy to produce the solutions that will address the deep causes of the crisis. ” monetary integration is a means to the ends enshrined in article 3 of the treaty, which states that the european union “ shall promote economic, social and territorial