Home Politics Dr. Patrick Njoroge, the outgoing governor of the Central Bank of Kenya,...

Dr. Patrick Njoroge, the outgoing governor of the Central Bank of Kenya, has rejected Kamau Thugge’s proposal for a local dollar bond to stabilize the shilling. “It’s a slick slope,”

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Dr. Patrick Njoroge, the departing governor of the Central Bank of Kenya, has shot down Kamau Thugge’s proposal to issue a local dollar bond in order to relieve pressure on the shilling.

Thugge, the candidate for the position of CBK governor put out by President William Ruto, informed the National Assembly’s Planning Committee that he would work with the National Treasury to issue local dollar bonds.

Thugge claims that by allowing Kenyans to discharge their deposits, the idea will lessen pressure on the shilling and improve the dollar’s liquidity.

“If we can get Kenyans holding dollars in deposit accounts to release them by buying into the bond, then we will have the possibility of increasing the liquidity of dollars in the system, and this will help us in building up foreign exchange reserves at the CBK,” said Thugge.

Njoroge remarked that this is based on a misunderstanding of the dollar deposits that already exist in commercial banks.

He warned that the idea could disenfranchise regular investors and further cement dollarization, referring to it as a “slippery slope.”

It is extremely difficult to imagine how the government will collect tiny deposits from private investors, such as Sh1,000 each through a bond issued in a foreign currency.

You can imagine the impact this has had in other economies since this would ultimately fuel the dollarization of the economy. Njoroge stated, “I think it’s a slippery slope, and I’m questioning the merits of it.

According to Njoroge, the market’s dollar shortfall will not be resolved by the issuing of locally denominated bonds.

The CBK governor added that the bond will only draw in more money from around the globe.

He said, “We already do this when we issue a Eurobond, which is mostly purchased by non-resident investors.

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