CBK Transfers Sh4B to Government Consolidated Fund

The Central Bank of Kenya (CBK) has transferred to the Government Consolidated Fund Sh4 billion as distribution from CBK’s General Reserve Fund (GRF) as at end FY 2021/22, in a bid to increase its capital buffers.

Concurrently, this transfer saw CBK increase its paid-up capital from Sh35 billion to Sh38 billion.

The transfer (loosely known as “remitting of dividends”) and the capital increase followed approvals by the CBK Board.

In making its determination, the CBK Board also considered CBK’s financial needs with the objective of ensuring CBK is well-resourced to deliver on its mandate in the increasingly uncertain economic environment.

In particular, GRF resources are needed for Modernizing CBK’s facilities and infrastructure in keeping with its mandate and strengthening CBK’s financial position to make it more resilient to shocks.

“Increasing the paid-up capital will cushion CBK against possible shocks or impairment from deficits, which could undermine its financial sustainability. Best practice for central banks is that the capital buffers and surplus distribution procedures should enable the central bank to pursue its functions even in times of stress while sustaining its financial independence,” CBK said in a statement.

CBK needs to increase its paid-up capital in the period ahead towards its authorised capital of Sh50 billion.

The increased paid-up capital to Sh38 billion strengthens CBK’s financial position, specifically placing it in a position to better absorb losses that may arise from discharge of its functions; provide confidence that it will meet its domestic obligations; and cushion against shocks that may adversely affect its balance sheet.

The transfer was in accordance with Sections 9 and 51 of the CBK Act, relating to the treatment of CBK’s net annual surplus, and was executed by crediting the Ministry of Finance’s Deposit Account at CBK.