Kevin J. Kelley
The East African (Nairobi)
July 15, 2002

The stalemate preventing Kenya from regaining access to World Bank and IMF credit is also jeopardising the country’s chances of negotiating lenient loan-repayment terms with the Paris Club of donors.

Unless the IMF formally restores its lending programme, Kenya will not be able to strike a deal with the Paris Club similar to the one-year $288 million debt-repayment reduction agreed on in November 2000.

This potential effect of the impasse between Kenya and the Bretton Woods institutions was noted by Menachem Katz, chief of the IMF’s Kenya mission, in an interview with The EastAfrican last week. Largely because of “technical and legal complications,” Kenya is also unlikely to secure an agreement with the London Club of commercial creditors, Mr. Katz added. Kenya had not previously concluded an arrangement with the London Club similar to the deal it struck with the Paris Club, which consists of donor nations such as Britain and the United States.

Based on Mr. Katz’s comments, a breakthrough does not appear likely during the next talks between Kenyan and IMF officials, expected to take place in Washington later this month.

Mr. Katz said the Fund was making no changes in the conditions it says Kenya must meet in order to win resumption of a combined $300 million in assistance from the IMF and World Bank.

That aid package has been suspended for more than 18 months and is due to expire in 2003.

He further noted that the suspended programme could be extended beyond its current 2003 termination date and added that the IMF remains hopeful that Kenya will begin performing “at least as well” as neighbouring Tanzania and Uganda.

The government’s decision not to factor IMF funds into the new budget does not presage the collapse of Kenya’s dealings with the Bretton Woods lenders, Mr. Katz said.

The decision instead shows that Kenyan officials “wanted to be prudent.”

The IMF is not delaying a decision on its Kenya programme pending the outcome of the elections, Mr Katz continued. Negotiations will continue with the present government on a nonpolitical basis, he said.

At the same time, Kenya’s Permanent Secretary in the Ministry of Finance and Planning Mwaghazi Mwachofi, had said that the IMF may resume lending to Kenya in two weeks.

Mr. Mwachofi said the team dispatched in May to assess implementation of donor terms were currently reviewing this year’s budget, the only remaining condition.