No Privatisation, No Aid, World Bank Warns Kenya

By Kevin J. Kelley, Special Correspondent, The East African (Nairobi), 3 November 2000

Nairobi - A World Bank official has warned that Kenya will not receive up to two-thirds of a newly-approved $72 million emergency energy loan unless the government makes good on promises to privatise power generating and supply enterprises.

The loan, approved by the bank's board on October 26, is to be disbursed in instalments over the next year. About $20 million is being made available immediately. But the balance will be provided, a bank official told The EastAfrican, only if the Kenyan government satisfies monitors that it is adhering to an agreed timetable on privatisation.

According to conditions attached to the loan, full privatisation of both Kenya Electricity Generating Company (KenGen) and the Kenya Power and Lighting Company is to be achieved in stages by November 2001. Regular reviews will be carried out during the next year to "ensure that the government keeps its commitments to reform the energy sector," the official says.

The emergency loan is intended to reimburse the government for the emergency purchase of 105 megawatts of power from three independent producers - Aggreko, Deuz and Cummins.

The three were expected to bridge electricity shortfalls from November but if the short rains fail, power rationing could be extended until mid next year. Kenya energy officials were in Uganda two weeks ago to negotiate increased power imports in order to keep a one-year power rationing programme at minimal levels.

If the World Bank does withhold a portion of the $72 million, the government will either have to cancel some of the purchases or find another source of funding.

In addition, the bank's board informally decided at its October 26 meeting, according to a source, that aid to Kenya for other purposes would not be approved unless the government abided by the terms of the energy assistance.

The board is tentatively scheduled to consider in December two loans to Kenya totaling $70 million - $45 million for private sector development initiatives and $25 million to improve delivery of public services and to spur moves towards "a more rapid, fair and honest justice system."

The deterioration of Kenya's economy has made the government increasingly dependent on aid from the World Bank and International Monetary Fund as well as from bilateral donors.