G-SPOT

The déjà vu in IMF loans to Kenya row

Similar austerity measures were applied by Mudavadi in Moi's era

In Summary

• Back in the day, donors and no the public took the lead in protesting state spending

International Monetary Fund
International Monetary Fund

All the recent talk in Kenya about the Bretton Woods institutions, as my old boss Philip Ochieng used to call the World Bank and IMF, reminded me of that difficult period between late 1991 and mid-1993, when Kenya was in trouble with the two lenders.

Unlike now when citizens have taken the lead against the government’s spending and borrowing, in those days, donors took the lead.

At that time with the end of the Cold War, Kenya had more or less lost overnight its status as one of the West’s African favourites and the foreign aid taps were suddenly turned off.

On November 25 and 26, 1991, the Paris Club, aka the Consultative Group for Kenya, made up of the World Bank and leading donor countries, met and decided enough was enough. They cited the need to implement economic and political liberalisation.

Basically this meant government had to permit multiparty politics, lift exchange restrictions on the shilling, end price controls and make import procedures easier. 

The political stuff appeared to be easier to do than the rest. By December 20, 1991, the contentious Section 2A that had been added to the Constitution in 1982, making Kenya a one-party state, had been repealed.

The repeal, rubberstamped by the Kanu delegates conference and later Parliament, returned Kenya to being a multi-party state and introduced term limits to the Presidency.

However, the economic stuff was going to need more than getting a few hundred party hacks to vote with their leader. A new face with clean hands was needed.

A couple of years earlier, the influential Local Government Minister Moses Mudavadi, an old political and personal friend of President Daniel arap Moi, had died. 

In what had become a pattern in Kenyan politics, Mudavadi's then politically obscure son and heir Musalia inherited both the parliamentary post and a Cabinet post.

In 1989, Moi created the Ministry of Supplies and Marketing and plonked his friend’s 30-year-old son there for the meantime. 

After the multiparty elections of December 1992, which Moi and Kanu won thanks to a completely divided opposition, there was still pressure from the donors and Bretton Woods to switch things up in the economy.

An unintentional by-product of this pressure for economic reform was the Goldenberg scandal.

The scam began in 1991, and by the time it was stopped by the efforts of the Central Bank whistleblower David Munyakei in 1993, it had cost the country more than 10 per cent of its annual GDP.

Some of the money from this scam was used to run the Kanu election machine and fund the Youth for Kanu ’92 group, from whence the likes of Deputy President William Ruto and others like Cyrus Jirongo launched their political careers.

Vice President George Saitoti was seen by many to have been culpable in the scandal, having approved the deal back in 1990. This, plus donor pressure, was probably why Moi was forced to drop him from the Finance ministry.

Saitoti was replaced by Musalia Mudavadi and it was then that the job of convincing the donors that things in Kenya had changed began in earnest.

The young, affable Mudavid was at that time seen as a clean, if inexperienced, pair of hands at the till. 

Mudavadi’s first budget presented in June 1993 was themed “Economic Reform through Fiscal and Monetary Discipline”. 

This budget promised to stir growth, control debt and bring inflation down from a crazy 27 per cent to a more manageable 10 per cent in one fiscal year and seemed to be just the sort of thing the donors wanted to hear.

What Kenyans did not want to hear was that with this liberalisation also came massive job cuts in the public service. This was to bring about a lot of pain and darkness for many families, but is a story on its own for another time.