Shock as Kenya denied debt relief

Biketi Kikechi and Ben Agina
East African Standard
June 13, 2005

Kenya’s exclusion from a multi-billion debt write-off by the World Bank and IMF for Africa’s poor countries was received with shock and consternation yesterday.

Finance ministers from the G8 countries did not enlist Kenya among 18 poor countries whose debts will be cancelled by the three multi-lateral donors.

They, however, took off the burden of repaying the debts from the shoulders of Uganda, Tanzania and Rwanda – Kenya’s major trading partners. The beneficiaries are classified as Heavily Indebted Poor Countries (HIPCs).

Disappointment that Kenya would still have to part with Sh78 billion a year servicing debts owed to multilateral and bilateral lenders was compounded by the fact that it is the only country in East Africa that failed to clinch the relief deal.

Kenya’s debt as of April 30 stood at Sh720 billion or 57 per cent of the Gross Domestic Product. Of the total Sh424 billion was external and Sh296 billion was domestic.

The principal amount the Treasury pays every year is Sh25 billion with an additional Sh8 billion in interest and penalties. If freed through a write-off, the money could be used to turn around key sectors such as education, health and tourism.

A debt-relief lobby group for Africa is sending nine members to Scotland to present the continent’s case at the G8-Leaders conference.

Leaders said they felt Western economic giants wanted to emasculate the country economically. The chairman of Parliamentary House Finance committee Mutahi Kagwe said HIPC structure appeared to reward countries that have not lived up to their commitment of repaying loans to bi-lateral and multi lateral lenders.

He said Kenya had always met its debt obligations but has never benefited from relief. “We have always paid our debts in spite of the economic hardships,” he said.

He said the principle under which HIPC was created amounts to “miscarriage of justice”. The Murkurweni MP charged that it was not fair for Kenya to be penalised for continuing to pay its debt whereas countries that cannot pay are the ones whose debts are being cancelled.

Assistant Minister for Trade Petkay Miriti described the situation as “very unfortunate indeed.” He was concerned Kenya had met all conditions imposed by western capital over time and yet the goal posts kept changing.

Miriti, claimed the aim was “to see the country lagging behind others in the region.” “It will be difficult for us because our neighbours will be investing that money in services and mobilizing trade when we are servicing debts,” said Miriti.

The Assistant Minister urged donor countries to treat all sub-Saharan countries equally, if they were serious about the continent’s economic problems.

Cabinet Minister William ole Ntimama whose docket includes the public service said the country should now work hard to survive without foreign aid.

“We should consider finding ways of working without depending on aid and that can only be achieved through unity and hard work,” said Ntimama. “I do not know if the reasons they usually give and that is bad governance and corruption but it will definitely hurt us,” he added.

Assistant minister for Finance Henry Obwocha said the Kenya was not been considered in the category of the Highly Indebted Countries but was optimistic its turn would come soon.

“Kenya is not among countries that do not service its debts,” said Obwocha. He promised to lead a Kenyan delegation to Geneva, Switzerland on June 20 to a debt management conference where he hopes to state the country’s case. “We hope to be considered for debt relief after this meeting,” said Obwocha.

Kabete MP Paul Muite called on Kenyan leaders to stop whining about the debt waiver initiated by Britain and draw up the country’s own strategy. “We should suspend payment of the debt for five years and redeploy the money to needy sectors such as Education, Health and infrastructure,” Muite said.

However, he explained that although this was radical move it was the only way that the country could develop. “We need to take radical steps to re-energise our economy. One such step is to suspend repayment of foreign loans,” he said

Former Kenya Association of Manufacturers chairman Manga Mugwe said the country would have accelerated growth had debt been cancelled. He said interests paid annually could have given provided a major economic boost to sectors such as infrastructure.

He was pessimistic about the future of the East African Economic, saying Kenya needed to review its position. “The economic partnerships will not last, because you cannot sit and do business with a neighbour who has been given all advantages over you,” said Mugwe.

The Chambers lobby group that for many months lobbied for debt relief said its members would head for Scotland to present their case. The Chief Counsel Ababu Namwamba said the lobby has prepared a special documentary called A Mortgaged Nation to be presented to G8 leaders.

“I will be there with nine members and enjoin other civil society groups from the continent to present our case,” said Namwamba.

Categories: Africa, Kenya, Odious Debts

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