Aid crisis as Moi scraps IMF plan



 

Mark Huband in Nairobi

The Guardian, 25 March 1993

 

KENYA’S President Daniel arap Moi scrapped an International Monetary Fund economic reform programme, pleading widespread hardship, after his personal calls for a resumption of foreign aid were rebuffed, it emerged yesterday.

Sources in Nairobi last night confirmed that Mr Moi asked the head of at least one donor government to put pressure on participants at a London meeting of Kenya’s financial donors on March 13 to resume £27 million a month in aid. The balance of payments assistance was suspended in November 1991 until. The government introduced financial and political reforms.

Drastic economic reforms agreed with the IMF and the World Bank were announced on February 12, when the Kenyan shilling was devalued by 25 per cent. Inflation has since soared to around 50 per cent.

The donors’ refusal to resume aid, despite Mr Moi’s pleas for financial help in introducing the reforms, was behind a government decision on Monday to scrap economic liberalisation measures and reintroduce price controls and Central Bank control of foreign exchange exports.

Kenya’s finance minister, Musalia Mudevedi, justified the decision to scrap the reforms. He said their implementation “would lead to the instant collapse of a large number of companies, mass redundancies and massive recession”. Earlier Mr Moi had described the IMF demands for reform as “cruel, unrealistic and dictatorial”.

Donor demands for an end to tight government control of the economy are aimed almost entirely at ending government corruption. There is so little donor faith in the government that normally conservative diplomatic missions openly applaud articles exposing corruption.

Kenya’s relations with its foreign creditors have reached a crisis. The possibility of introducing reforms to the mismanaged economy has been set back months.

“There’s very little disposition on the part of the international financial institutions to take anything from the Kenyan government on trust. Always linked in with crisis is the suspicion among the donors that every minister sees the opportunity for graft,” the head of one diplomatic mission in Nairobi said yesterday.

Participants at a closed meeting of donors in Nairobi yesterday plan to recommend that the IMF maintains contacts with the government. They also intend to recommend that the United Nations or a similar international body send a “senior international figure” to convince the government to reintroduce reforms.

Steve O’Brian, head of the World Bank delegation to Nairobi, met treasury and finance ministry officials yesterday.

 

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