Hurried talks with IMF may not yield results before elections
Aug. 27, 1997
NAIROBI, Kenya (AP) _ President Daniel arap Moi's hurried invitation to the International Monetary Fund to reopen talks on a crucial loan agreement may not yield results before general elections, an IMF official said Wednesday.
Reimer Carstens, the IMF country representative in Kenya, said the institution wants hard evidence, not just verbal guarantees, that Kenya has tackled high-level corruption and economic mismanagement before it can release part of the $220 million loan, suspended July 31.
But Moi's ruling Kenya African National Union party may have difficulties meeting the IMF demands in an election year. The government has been slow to make good on its promise to privatize the state corporations that were a ready source of cash for the party in the 1992 elections.
The IMF's lending cut created a 8.3 billion shilling ($120 million) shortfall in the Kenyan budget.
The move battered investor confidence and sent the shilling plunging against the dollar. It also forced Finance Minister Musalia Mudavadi to rewrite the budget and raise taxes on consumer goods to come up with other sources of revenue to bankroll the government and keep the inflation rate at 10 percent.
``It is particularly difficult during an election period to implement such important measures'' as demanded by the IMF, Carstens said. ``Definitely, there have to be some results. Some legislation has to be passed, and that cannot happen overnight.''
The IMF cut the three-year, low-interest loan after it established that the government was unwilling to act on corruption, bad governance and economic reforms.
Moi initially brushed off the loan suspension, calling it political and saying Kenya would just tighten its belt and do without it.
But after an outbreak of violence on the Indian Ocean coast left more than 40 people dead, thousands displaced and tourist bookings canceled, Moi called IMF Managing Director Michel Camdessus last week and said he was willing to talk.
Carstens said talks have focused on reopening formal negotiations on the second $36 million tranche of the Enhanced Structural Adjustment Facility, approved in April 1996.
Liberalization of the economy is closely linked to simmering political tensions in Kenya. Moi is under strong pressure from international donors to enact legal and constitutional reforms before the elections. No date has been set, but they must be held by the end of the year.
In 1991, donors withdrew support to force Moi to agree to a multiparty system.