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{
    "id": 1342566,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1342566/?format=api",
    "text_counter": 169,
    "type": "speech",
    "speaker_name": "Prof. Njuguna Ndung’u",
    "speaker_title": "The Cabinet Secretary for National Treasury and Economic Planning",
    "speaker": null,
    "content": "currencies or crypto currencies and they were to try and defeat the process. They were established just because of the frustrations of cross border payment system. In a sense, what we are saying is that we have to improve our cross-border payment system just along the lines I said about Pan Africa Payment or a payment system that is currency neutral for us to beat this problem especially from the diaspora. I do agree that the payments system that is currency neutral is very important. I do understand there is a feeling that we should go into the single currency, but we were there looking at the Euro and obviously there are lessons to be learnt. Single currency is a political decision and I am here with you and that would be saying that this is where we need to go, but coordinating too many countries to take one single currency takes a bit of time. In fact, our advice is that we go into a payment system and then create a numeric that can be exchanged across those countries. I am sorry, this is not theory. It is practice. It is extremely very practical. Markets are segmented in our region. It depends which segment of the market you operate in. That is why when you go into a particular market, you get a different rate, but there is a unifying rate. Let me say that the most important thing is to accept that there have been policy mistakes and we are paying for them very hard. I would not go through it because some of it, I am already accused of being theoretical. It can be extremely theoretical. However, let me put it this way that the moment you change the relative price structure, whether it is coming from heavy investment in non-tradeable sector that is like infrastructure, road sector, housing sector and you are holding your currencies constant, what you are doing is to change the relative price structure and the value of the currencies. Therefore, it becomes misaligned. We are paying the price of misalignment that happened within five to seven years ago. That is what we are paying. In a separate moment, maybe I can explain that in a less technical way. However, we are paying the price of those historical mistakes that happened over the last five to seven years. That is why, as soon as you allow the nominal exchange rate to move, it could not fluctuate between 20 cents on either way because there was a requirement. Then we restarted the inter-bank market and there was a steep depreciation that was also being pushed by the scarcity value of the dollar. The dollars were retreating. Therefore, we have a combination of forces that have hit us. You cannot disentangle some of those processes. I want to summarise and say that there was a policy mistake. By the time we were correcting the mistake, there was a scarcity value of the dollars. The global shortage of dollars hit us. I believe the interbank market will work. The Central Bank of Kenya has provided appropriate forex codes of trading. Once we ride over the shocks hitting us, what we really need is to come to very reasonable or normal trading positions and then we will predict. The most important thing is that the CBK provides information of how currency is trading every morning. In fact, even when you go to Google, you still find that you can get information every minute. That is for purposes of coordinating information search. It is important. We would be happy if the market was working properly. I am very happy about the question of G2G. I had to come up with a statement to show where we are. I appreciate that we have safeguarded supply and protected ourselves against extreme volatility. It is going to be difficult for me to develop a counter-factual to show what would have happened. It is extremely difficult. At least, you can see the amount of dollars we removed from spot trading. That is a good example. I saw the newspapers report how much have been paid and how much is being stored by banks holding the Letters of Credit (LCs). Just imagine. Those amounts of dollars would have been procured in spot trading. We have prevented ourselves from that kind of expectation. Let me come to the question of free fall. It is not a free fall. It is a process of adjustment from previous mistakes. To accept or own mistakes when they happen. Let us own them and leave down that bad history so that we forestall future mistakes. At the same time, if you want to see a good example, look at the indicator of current account deficit in those years. You will The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}