Since he came to power in December 2002, Kenyan President Mwai Kibaki has made the sorts of noises that international investors — and multilateral donors — like to hear.
An international investment conference, held last week, saw the government pledge to streamline procedures for entrepreneurs who want to start businesses in Kenya. Authorities have also cracked down on corruption in the judiciary, detaining 23 judges who were named in a report issued in 2003 by a government committee.
A probe was launched into the infamous Goldenberg affair, which caused Kenya to lose about $600-million for fraudulent gold and diamond exports in the early 1990s — deals that were allowed to proceed even though the country has few deposits of either gold or diamonds.
As a result of all this spring cleaning, the International Monetary Fund (IMF) has welcomed Kenya back into the fold after a three-year suspension prompted by concerns about graft and poor governance. Last November, the institution approved a $250-million loan to the East African country. Other donors followed suit just a few weeks later, pledging $4,1-billion in assistance until 2006.
Good news for some? Yes — but for others, a source of dismay. A number of civic groups in Kenya say good governance should have been rewarded with debt relief, not more loans.
”Instead of the government soliciting for further aid, which has to be repaid with huge interest eventually, it should be negotiating with the donors on how it will be included in the list of heavily indebted poor countries … after which it will be relieved of some of the debts like the rest of the countries in the region,” says Oduor Ong’wen, former chairperson of the National Council of NGOs in Kenya.
”The debts need to be cancelled and the money that would have been used to service the debts, be directed into basic amenities, which have been compromised,” he adds.
About 56% of Kenya’s 30-million population lives below the poverty level of less than $1 a day, according to the Ministry of Planning and National Development.
The heavily indebted poor countries are states that have been identified by the World Bank and the IMF as having debts that cannot realistically be paid off using their resources.
An initiative to address their plight was started in 1996 by the two institutions in a bid to ensure that debt repayments did not engulf spending on health, education and other services. Various aspects of the programme have come under fire, including the fact that countries that want to receive assistance have to implement rigorous economic reforms for a number of years before they qualify under the initiative.
Concerns about debt relief dominated the international agenda in the late 1990s, when NGOs — under the umbrella of the Jubilee 2000 alliance — pushed donors to scrap debt by the new millennium. A report issued in February this year by the International Labour Organisation, entitled A Fair Globalisation: Creating Opportunities for All, served as a reminder that the issue is still current.
Says the document: ”In many poor countries, mostly in Africa, external debt is still at unsustainable levels. Between 1990 and 2001, external debts as a percentage of gross national income rose from 88,1% to 100,3% in the severely indebted countries.”
”In 2001, the LDCs [least developed countries] were still spending almost 3% of GDP [gross domestic product] on servicing debt — an indication of how debt relief can rapidly free up resources for development,” it adds.
According to Chambers of Justice (CJ), a group at the forefront of campaigning for debt relief in Kenya, the country at present uses almost half of its Budget to pay for debts.
”The country spends a large portion of its Budget on debt service, cutting on other critical human development sectors. This has obvious implications for development,” says Ababu Namwamba, the organisation’s chief counsel.
”During last year’s Budget, read in June, the government allocated 30% to education, health got 8%, while debt servicing received 42%,” he noted. ”Because of this, the Budget had a deficit of 174-billion Kenyan shillings [about $2,3-billion], almost 50% of the total Budget.”
CJ puts Kenya’s debt burden at $9-billion, three times the annual national revenue of $2,7-billion.
However, the figures provided by the Ministry of Finance are different.
”The debt burden is about 605-billion Kenyan shillings [about $7,9-billion],” says Eunice Muthamia, the ministry’s chief public relations officer. Of this total, about $3,3-billion is internal debt, she says — adding that the government is working towards debt relief.
NGOs maintain that irresponsible lending to previous governments in Kenya is the main cause of the debt burden — and that donors should be held accountable for this by being obliged to write off debts.
Efforts to get comment about this ”irresponsible lending” from the local representative of the IMF, Samuel Itam, were not successful. However, a source at World Bank’s office in Nairobi said that there was no debt crisis in Kenya.
”The country can manage to pay for her debt. Kenya’s dilemma is due to domestic debts. When funding stopped for 12 years in 1991, the country resorted to borrowing internally through the Treasury Bill, whose loans need to be paid within a period of 90 days.”
However, words like these do nothing to allay the concerns of civic groups — which see a future of straitened circumstances as the government struggles to live within its means.
Last November, the World Bank advised Kenya to retrench public servants on the grounds that the civil service had become bloated. However, an effort to trim the service is likely to meet with a militant response from public workers who have set their sights on a 600% pay rise by the end of this month — not reduced staff quotas. — IPS