Penitence wins Kenya return of World Bank aid



 

Mark Huband in Nairobi

The Guardian, 22 April 1993

 

KENYA’S financial donors ended a 16-month suspension of foreign aid and released £56 million-worth of funds yesterday after the government promised to introduce reforms which it rejected earlier this year.

The World Bank, which had insisted that balance-of-payments support should remain suspended until the government curbed the money supply, will release the funds within the next week to finance development of exports.

A second £56 million tranche will be made available to finance education reforms once the extent of changes in the export sector have been made clear.

The aid was suspended in November 1991 when donors decided that there should be political reform to end the one-party state, and economic’ reform to end corruption. The Kenyan government has argued that this was only possible if the aid was made available.

In March, the government shelved all reforms. President Daniel Arap Moi described them as “suicidal and dictatorial”, owing to the absence of provisions which would reduce the social hardship they created: increases in unemployment and prices.

Announcing the resumption of support, the World Bank’s vice-president for Africa, Edward Jaycox, said in Nairobi yesterday: “The Kenyan government has certainly had a difficult time. It’s been trying to manage the political and economic transition without support. Economic management has been flawed, to say the least. We have managed to reach agreement, and the government has come all the way to the bank.”

Mr Jaycox said that Kenya’s credibility in the eyes of foreign investors was now on the line. “I hope that, by opening balance of payments support, we will assist in giving it the credibility it needs,” he said.

Kenya’s finance minister, Musalia Mudavadi, said yesterday the government would introduce measures to end the flagrant abuse of banking laws, which have led to an increased money supply and financial instability.

Mr Mudavadi admitted that there had been mismanagement and that tighter financial controls would curtail abuses. He said that the prosecution of corrupt government officials was not being considered.

However, opposition parties last night questioned the government’s promises.

“This government is not dedicated to economic reform, and nor do its entrenched interests allow it to be keen on honest management of the economy,” said Robert Shaw, the economy spokesman of the Ford-Kenya opposition party. “But it’s beginning to realise that the combination of angry donors and a vocal opposition are starting to succeed in exposing and curbing some of its worst excesses.”

 

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