Less than a year after sweeping his National Rainbow Coalition (NRC) to power, Kenya’s President Mwai Kibaki has won a good housekeeping seal of approval from the stony-faced International Monetary Fund (IMF).
The Breton Woods institution has found that Kibaki made good on his promise to tackle corruption head on. Issuing a statement commending the new government’s ”strong commitment to break with Kenya’s past record of uneven economic performance”, the IMF approved a three-year $252,75-million loan to the country.
”The Kenyan government has already taken significant steps in its fight against corruption, with the passage of key governance legislation in May this year and the setting up of institutions to enforce the legislation,” the statement added.
Kibaki has boosted tax collection, stripped the public service of thousands of ”ghost workers” used to pad civil servants’ pay packets, and appointed a corruption czar: John Githongo, the head of Transparency International’s Kenya chapter.
The IMF, along with the World Bank, cut off the flow of money to Kenya in 2001, judging that the Kanu government, which had ruled the country for four decades after independence, had refused to act against graft.
Earlier this year World Bank president James Wolfensohn indicated that the tide was turning in Kenya’s favour.
Addressing an anti-corruption workshop in Nairobi, Wolfensohn said Kenya was on the right track, but he warned the NRC government not to hang about on tackling bottlenecks such as security and poor infrastructure. He said the window of opportunity was a transient phenomenon for any country.
”You stay centre-stage with everybody loving you for a very short time in this world. Therefore, it is now time to move quickly.”
Local economists point out that a string of conditions remains if the flow of IMF funds is to continue into Kenya.
”The money is being given in batches, which means that full trust has not yet developed,” said Kwame Owino of the Institute for Economic Affairs in Nairobi.
”The money is also coming with a lot of conditions, which means we may not get it all if breaches occur in the process.”
The first tranche will be placed in the country’s Central Bank as stand-by credit for financing imports when the economy picks up.
World Bank country director in Kenya Makhtar Diop warned that the country’s bloated public service —it has the most civil servants per capita in Africa — needed heavy pruning for growth to accelerate.
”There is room to rationalise government intervention and provide more space for the private sector,” said Diop.
Kenya has one of the lowest rates of public investment, at about 3% of the budget.
”This means it has not put the money needed into schools, hospitals or rural feeder roads,” said Diop.
Government needed decentralisation of government to allow rural communities to set their own priorities.
The poor state of tax collections remains a brake on the fiscus. This has become a vicious cycle with the revenue service underfunded and honest taxpayers increasingly angry at their disproportionate contribution.
Properly managed, the IMF says, the level of taxation as a percentage of gross domestic product should halve from its current rate of 21%.
Poor collections are ascribed to the fact that Kenya’s budget deficit of $740-million this year is nearly double that forecast.