Central Bank of Kenya Governor Patrick Njoroge openly defied a directive from the government asking the bank to surrender cash to fund the day to day operations of state agencies.
Business Daily was first to report on Wednesday, November 27, that the CBK governor defied the order from Treasury, for state agencies to surrender cash and treasury bills to fund a budget shortfall that the country had experienced.
The governor, addressing the media during the Monetary Committee meeting on Tuesday, November 26, reiterated that CBK would not be coaxed to surrender surplus cash and government securities as demanded.
The publication reported that on November 11, the government ordered all state agencies to forward surplus cash and treasury bills, with CBK expected to remit to a tune of Ksh27 billion to ease cash flow in the government.
"Surrendering to the government's requirements would be akin to printing money. The CBK is not in the business of bailing out cash-strapped governments," the governor was quoted.
"Such bailouts monetize the deficit one to one, which means that when CBK prints money, it will be printing money to cover the deficit and would draw the central bank as a conspirator in fiscal decisions that subordinate the central bank to financial decisions and political imperatives," he added.
The government is also reported to be on the spot with suppliers haranguing it over delays to pay close to Ksh150 billion owed to them for services provided.
The government's problems are also compounded by reports that it managed to collect only Ksh24.6 billion in the year ending June 2018 from state-owned companies where it has shares, against their revenue target of Ksh36.7 billion.
This shortfall was largely blamed on the CBK, which was expected to remit Ksh5.7 billion but managed a paltry Ksh800 million, with part of its income going to the printing of new currency before the September 30, deadline.
"If the government is short on revenues and wants, in a sense, to assault the CBK and grab whatever resources there are, that has never worked and will never work," he was quoted.
"We do not operate under those sorts of regimes. If decisions are made in smoke-filled rooms by people who want to send rockets to the sun, they end up with those figures. We follow specific laws and we've been doing it for 54 years," he stated.
