Kenya Feared Not Eligible Yet for Debt Relief

Panafrican News Agency (Dakar), 27 March 2001

Nairobi, Kenya - A report just released in London warns that Kenya was unlikely to qualify for debt relief under the heavily indebted poor countries (HIPC) initiative, unless it began to show a history of commitment to economic reform and good governance.

In its latest Kenya Country Report the London-based Intelligence Economic Unit (IEU) intimates that the country's chances remained slim unless Kenya can "convince donors that any debt write-off [would be] channelled into social sector spending to help alleviate poverty."

Kenya has so far unsuccessfully sought to be included in the HIPC initiative now benefiting neighbouring Tanzania and Uganda.

The IMF and World Bank have consistently accused Kenya of making commitments then breaking them at will, observers note.

The IEU said that for it to really prove it has such commitment Kenya will have to adhere to all the conditions agreed upon with the Bretton Woods institutions for the rest of this year and, maybe, up to the first half of 2002.

The country, it noted, was able only to negotiate the rescheduling of 300 million US dollars of debt arrears, but not a write-off, with the Paris Club in France last 15 November.

Experts believe that as long as Kenya spends about 40 per cent of its resources in servicing debt, thereby depriving social sectors like health, education and housing their resources, poverty will continue to crush the bulk of the citizenry.

Currently the World Bank and IMF have halted lending, insisting that Kenya commit itself to combating corruption through reinstating the outlawed Kenya Anti-Corruption Authority (KACA). They want a public service code of conduct enacted and an economic crimes bill put in place.

The donors also want a bank interest bill, which seeks to reduce lending interest rates, shelved, arguing that it goes against the grain of privatisation the government has committed itself to. These were identified by the country report as underlying the current stand-off with donors, although there are several others, including privatisation of state corporations like Telkom Kenya, Kenya Power and Lighting Company and Kenya Railways.

The Bretton Woods institutions also want a downsizing of the civil service, and the streamlining of procurement procedures.

But the report also notes that although Kenya's economy may have performed quite poorly for the year ending 2000, indications were that the country would have a positive growth this year. It predicts a real GDP growth rate of 3.5 per cent in 2001 and a possible 4.6 per cent in 2002.