Donors beginning to show Kenya respect

International Monetary Fund (IMF) chief Dominique Strauss-Khan received a fairly warm welcome to Kenya last week, including meetings with the President and the Prime Minister.

And in a statement released before he left Nairobi, Mr Strauss-Khan showered the government with rare praise, citing good economic policies in response to the aftershocks of the global financial crisis.

Yet his visit was more remarkable for the absence of public buzz and stampede in government offices normally associated with the arrival of a major lender in the country.

Notably, no major financial commitments with the government or tough conditions for future funding were announced while the country’s leading newspapers did not splash news of the presence of the IMF’s managing director on their front pages.

Suspension of aid

The quiet diplomacy adopted by Mr Strauss-Khan is a sharp contrast to the humiliating relationship the IMF and other donors had with the government in the period following the suspension of aid to Kenya in 1991.

In 1994, for instance, then Finance minister Musalia Mudavadi would lead delegations of senior Treasury officials to the infamous donors’ consultative meetings, dubbed the Paris Club, to ask for resumption of aid and debt relief — and return empty-handed.

At the meetings, the government would be roundly assailed with criticism for failing to implement economic reforms prescribed by the IMF and the World Bank, violating human rights and falling short on various aspects of Western democracy.

However, Kenya began to earn the respect of donors from 2003 with financial policies meant to make the country pull itself up by the bootstraps.

Implementing policies to reduce aid dependency and cut down on public debt is widely believed to be one of the notable successes of the Narc administration and the current coalition government under President Kibaki.

The policies articulated in the new debt management strategy released by the Ministry of Finance in June last year entail minimising the cost of borrowing by securing funding for different sectors, negotiating less expensive concessional loan deals and seeking alternative sources of funds for infrastructure projects.

Although the country’s debt rose to Sh971.5 billion in 2008, its proportion to the gross domestic product is getting smaller. Contrary to popular belief, the government meets up to 94 per cent of the cost of the free primary education programme (FPE), which has put more than eight million children in school.

Financial support by the biggest donor of the programme, the British Department for International Development (DfID), amounts to less than two per cent of the total cost of the programme.

But the government’s achievement has recently been eclipsed by reports of corruption at the Ministry of Education involving the FPE money.

While improved debt management has certainly drawn attention to Kenya, policy analysts also attribute the change of attitude among the country’s traditional lenders to the growing influence of China in the aid market.

“IMF is concerned about China’s role,” says Atieno Ndomo, a social and economic policy analyst, commenting on the recent visit by the Fund’s managing director.

More than half of the contracts for major infrastructure projects in Nairobi alone have been awarded to Chinese companies in the recent past.

It is noteworthy that Mr Strauss-Khan alluded to the IMF asking for a “fair deal” between China and Africa in his guarded response to a question during a panel discussion at the University of Nairobi last Monday.

Other panelists were Prime Minister Raila Odinga, Finance minister Uhuru Kenyatta, aid activist Bob Geldof, Nobel Peace laureate Wangari Maathai and Akere Muna of Transparency International.

But experts like Ms Ndomo are warning that there could be more to the IMF’s new charm offensive than meets the eye.

“The government should know that the IMF is not our friend. I suspect the IMF might be out to lure the government into an expanded [aid] programme similar to the like the structural adjustment programmes (SAPs),” she says. “I don’t understand why the government even came to accept funds from the Exogenous Shocks Facility (ESF).”

IMF lent Kenya about $200 million from ESF to deal with the effects of the global financial crisis in June last year.

SAPs were a series of economic and social reforms imposed on Kenya by the IMF and the World Bank in the 1980s and ‘90s as a condition for aid.

They were linked to increased unemployment following mass layoffs from the civil service, cost-sharing policies that made it difficult for the poor to get education and health services and low standards of living in the country, among other things.

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