The arrest of the Treasury CS Henry Rotich on corruption charges on Monday has hit the shilling hardest on a 20-month low against the dollar and the Eurobond, signaling investors’ unease at the vacuum left at the Ministry of Finance.
Director of Public Prosecutions Noordin Haji ordered the arrest of Rotich, PS Kamau Thugge, and other 28 senior government officials over the Kimwarer and Arror dams scandal.
They include EAC PS Susan Koech, Kerio Valley Development Authority managing director Kipchumba Kimosop, Treasury chief economist Kennedy Nyachiro and Treasury director of resource mobilization Jackson Kinyanjui.
According to the DPP, the senior government officials flouted procurement rules and committed illegalities in the Arror and Kimwarer dams scandal.
The shilling lost ground against the US dollar sinking to levels last seen in November 2017, even as other financial markets resisted shockwaves triggered by news of the arrests.
The Kenyan currency traded at 103.67 units to the dollar Monday, slipping from Friday’s Sh103.1, according to Central Bank of Kenya data. Kenya’s Eurobonds at the international markets also took a hit.
According to reports, Kenya’s dollar bonds maturing in 2028, 2032 and 2048 slipped around 0.5 cents, according to data by Tradeweb. Investors at the Nairobi Securities Exchange (NSE), however, defied news of the arrests as reaction to the news at the bourse remained muted.
Market capitalization stood at Sh2.283 trillion at the close of business on Monday, up 0.07 percent from Sh2.281 trillion on Friday.
The arrest of the duo also came at a delicate economic cycle for the country and the Treasury docket.
The Treasury is expected to help Kenya raise money locally through taxes and the international debt markets in coming months and wants to woo international investors to fund President Uhuru Kenyatta’s Sh3.1 trillion Budget between July 2019 and June 2020. Mr Rotich presented the budget before Parliament last month.