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{
"id": 193468,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/193468/?format=api",
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"type": "speech",
"speaker_name": "Mr. Kimunya",
"speaker_title": "The Minister for Finance",
"speaker": {
"id": 174,
"legal_name": "Amos Muhinga Kimunya",
"slug": "amos-kimunya"
},
"content": " Thank you, Mr. Speaker, Sir. The Government will continue to let the market determine the Kenya Shilling exchange rate and only intervene to smooth out short-term fluctuations. It is worth noting that had the shilling been weaker than it is today, the cost of imported fuel and food would have been much higher, which would have led to even stronger inflationary pressures. We will, of course, continue to closely monitor developments in the real exchange rate and other indicators of external competitiveness to ensure that Kenya's exports remain competitive. Further, and in order to cushion our economy from exogenous shocks such as oil prices and drought, the Government will build adequate foreign exchange reserves equivalent to four months of the projected import cover. Mr. Speaker, Sir, we have made tremendous progress in implementing financial sector reforms covering the areas of micro-finance, insurance, banking and the capital markets. I am happy to report to this House that the Micro Finance Act is now operational, following the issuance of supporting regulations. But we still need to deepen reforms to make our financial sector more competitive and stronger. In this regard, I will be proposing, later in my Speech, measures to increase the minimum capital requirement for banks over the next two years. The Government will also be tabling before this House, the SACCO Bill, and the National Payment Systems Bill. The enactment of these Bills will further strengthen our financial system, and make it more competitive regionally. We will also strengthen the regulatory role of the Capital Markets Authority (CMA), and address weaknesses in its regulatory framework, including the introduction of risk-based capital adequacy for the capital markets. Mr. Speaker, Sir, further reforms to improve performance of other sector players are being implemented, including the restructuring of five development finance institutions and the Kenya Post Office Savings Bank (KPOSB), the privatisation of the National Bank of Kenya (NBK) following the completion of its financial restructuring, and allowing payment of loans directly to the Agricultural Finance Corporation (AFC). Mr. Speaker, Sir, given the critical role of infrastructure in improving our country's competitiveness, we will need to invest substantially in key infrastractural facilities. However, financing of infrastructure continues to be a major challenge. To mitigate the challenge, we intend to tap more into the private sector financing. Limited cases of such partnerships have been executed, but wider scale partnerships require an adequate regulatory framework to guide and protect the interests of all the partners. In this regard, the Government will issue, under the Public Procurement and Disposal Act of 2005, guidelines on Public-Private Partnerships (PPPs) early in the next financial year, after the necessary consultations with stakeholders, which are ongoing. The Government will also set up the institutional framework for co-ordinating and managing the PPPs. Mr. Speaker, Sir, even as we await the PPPs framework, we are determined, more than ever before, to improve the condition of our infrastructure as a key policy priority towards the realisation of Vision 2030 objectives. The implementation of various infrastructure projects in this Budget will reduce the cost of doing business and facilitate private sector expansion and employment opportunities. In line with this commitment, I plan to issue a total of Kshs52 billion in infrastructure bonds, comprising of Kshs33 billion through a debut international sovereign Bond, and Kshs18 billion from the issuance of long- term domestic Bonds to finance the rehabilitation and expansion of the road network, enhancement of energy and water supply capacities and the further rolling out of the ICT infrastructure. Mr. Speaker, Sir, hon. Members will recall that we planned to issue a sovereign Bond in the international capital market during the 2007/2008 Financial Year to provide funding for key infrastructure facilities, and also to establish a benchmark for the private sector to borrow internationally. However, following the post December, 2007 election crisis our initial favourable 1140 PARLIAMENTARY DEBATES June 12, 2008 sovereign ratings by Standard and Poor's, and which had been later confirmed by Fisch Rating in 2007, were downgraded. Faced with these circumstances, it was prudent and wise to defer the issuance of these milestone sovereign Bonds, as the reduced ratings impacted negatively on the pricing of the bond. We are now gearing up for this year's ratings from the two rating agencies. Our plan is to launch the Bond at an appropriate time in the course of the new financial year. Such external borrowing will ease pressure on the domestic market and help us maintain low and stable interest rates. Mr. Speaker, Sir, the condition of our road network continues to impose a heavy burden on road users, thus increasing the cost of doing business and making our products uncompetitive. As hon. Members are aware, we have accelerated road construction throughout the country, and measurable milestones have been achieved in form of actual kilometres paved. To further improve conditions of our road network, and make motoring enjoyable to Kenyans, I have allocated Kshs65 billion to finance new construction, rehabilitation and routine maintenance of various roads earmarked countrywide."
}