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Kenya's Season Of Bitter Medicine From The IMF?

  • Written by  John Githongo

The past few weeks in Kenya have seen saturation media attention on the almost US$3 billion that the Government raised via a sovereign bond over two years ago. In what has become a regular pattern the Ministry of Devolution was in the news again this time reportedly because it couldn’t say exactly how it had spent US$45 billion of the Eurobond monies. In 2013, African government’s raised US$11 billion in foreign markets and US$8 billion in 2014. In parts of the media not only in Kenya but outside as well, this was described as a ‘bonanza’ using logic President articulated when he declared that: “…[T]he Eurobond will “stop government borrowing from domestic markets, thereby helping drive down interest rates which will boost investment, spur economic growth and provide growth to our people”. These pronouncements were accompanied by breathless cheerleading from the banking sector, IMF, World Bank and other players in the global financial market. Africa and Kenya had arrived. In a very definite sense it had and has.

In Kenya the opprobria is caused by fact that a combination of external factors (like fears about US interest rates) and internal factors (like our capacity to steal all that isn’t nailed down on linked to a satellite tracking system) have led to a situation where questions are being asked about how the money was spent, by who and indeed if some of it even arrived in Kenya or went into private pockets.

The Kenya government went out seeking US$2 billion. However the over subscription led it to slap on an extra US$750,000,000. Last year’s budget documents reflect Eurobond proceeds of KSh.141 billion. This is the difference between the 2 billion and the amount used to pay a syndicated loan the government had taken from private backs a couple of years before. The US$750 million (Ksh.75 billion) is not reflected in either last year’s or this year’s budget. Naturally questions have arisen as to what may be going on. The error may be typographical or maybe the result of incompetence on an epic scale. The public mood is generally suspicious. There are good reasons for this.

Many Kenyans are willing to countenance that looting is underway in the fashion of the infamous Goldenberg scandal that preceded and continued for a brief period after the first multiparty election in 1992. Indeed, going by the figures being bandied about as missing, stolen, not accounted for etc – we are not talking of an episode of looting like Goldenberg but a systematic rape of Wanjiku’s public coffers that started in March 2013. Skepticism is heightened by the fact that despite the ‘bonanza’ that was supposed to reduce local interest rates they are rising instead and if, say, KSh.141 billion had been injected into our system in year it would have acted as economic adrenaline shot so large we’d be seeing and feeling it. Instead the government is broke and borrowing heavily from the local market; taking another syndicated loan and already drawing down an IMF facility that had been set-aside for difficult times. Meanwhile a wide range of current government commitments remain unpaid.

All these shenanigans have led us inexorably towards an ‘IMF programme’. Historically, this organisation has functioned, as a young masters student told me recently, “as an economic undertaker in Africa”. It is the surgeon who arrives with one solution: amputation! Amputation of institutions, employees from public service, spending plans etc. It includes too the privatization of public institutions and services. A fully-fledged IMF distress programme would be an embarrassment to the institution has it has been a determined cheerleader matters economic in Kenya including the management of public finances.

They face another challenge here: in Kenya’s political economy the entire government has effectively and informally been privatized already into a racket for the ruling elite their relatives, favoured tribesmen and political sycophants. Indeed, advise government to formally sell key profitable parastatals, for example, and they would be snapped up by government officials and their corporate associates and manifestations.

Greek Law and Criminology Prof Nikos Passas argues in the case of Greece that the IMF was well aware of the unsustainability of Greece’s foreign debt before the current crisis unfolded and their subsequent ‘regulatory fundamentalism’ was served up and deepened instead of helped solve the crisis. In Kenya’s case there is a school of thought that the train wreck we’re participating in, albeit in slow motion, has an air of inevitability to it because there is a total lack of will on the part of the political elite to do anything serious about it. For a generation of Kenyans who don’t remember the 1980 and 1990s when looting and greed collapsed banks and brought the economy to its knees the current time is educational. For the Kenyan people it will be a time of discomfort and pain realizing that real robbery by leaders takes place in broad daylight.

Originally posted here