Central Bank (CBK) Governor Patrick Ngugi Njoroge on Tuesday revealed how one scandal nearly crippled Kenya's economy.
Appearing before the Parliamentary Committee on Finance and National Planning, Njoroge noted how the Goldenberg scandal took a toll on the country's economy.
"Goldenberg scandal is a good cautionary tale as we know it devastated the economy to the weakest we have ever been," the CBK Governor noted.
Njoroge indicated that the scandal devastated the economy to the lowest that the country has ever been.
"The GDP fell to the lowest in the entire history of our country. Inflation surged to an all time record of 61.5% in January 1994.
"Treasury bill rates rose to a record 85% in July 1993. exchange rate depreciated by 143% between December 1991 and December 1993," Governor Njoroge stated.
He further noted that the scandal, a brainchild of businessman Kamlesh Pattni, weakened the banking sector as evidenced by the collapse of several banks during the period.
"The poor and vulnerable were hit the hardest as the price of essential commodities rose significantly," the CBK boss added.
The Governor was imploring the MPs against removing a CBK directive requiring prior notice, authorization and reporting whenever huge amounts of cash was transacted in the banking institutions.
"The consequences to the economy if the requirement on reporting on cash transactions were removed would be immediate and severe," the banker cautioned.
According to Njoroge, consequences to the wider economy include impaired ability to detect terrorism financing, inability to transact with the rest of the world and collapse of the economy.
The CBK boss noted that 99.3% of bank accounts in Kenya have deposits of less than Ksh1 million hence the large cash transfers rule only affects a small section of Kenyans.
This implies that only 0.7% of accounts have deposits of more than Ksh1 million and most Kenyans willingly report on any transactions as per the regulations.
