At
last Amani coalition Presidential candinate Musalia Mudavadi presidented his
paper early this week to race for highest city in the land.
The
DP is among the to candidates who wanted to become the fourth President of
Kenya after President Mwai Kibaki comes March 4th when Kenyans will
make there choice
Mudavadi
had put security, job creation and economical recovery on his top agenda if
elected by Kenyans to become next President After Kibaki.
Musalia
who becames the Minister and the age of 29 and made history as one of Kenya
shortest VP for just two month and the first to be rejected by voters is likely
going to use one of his 1993 historical Paris Club speech to convince voters
that he can steer Kenya economy and address international community.
Both historians, media , and voters will be
using politicians and Presidential past
records including speeches and performances in
numerous Ministries to judge them and for me Mudavadi
Paris Club speech is one of the best, because it convinced international
communities including World Bank to resume
giving Kenya money in order to support illing economy during Moi regime
The following is Mudavadi speech, media
cavarage, reaction both locally and internationally to name few.
In December 1993 excited vice-president and
minister for planning and national development the late Prof. George Saitoti on
Tuesday interrupted parliamentary proceedings to relay the breakthrough at the
CG, which he termed "successful". Equally satisfied with the outcome
was then minister for finance, Mr. Musalia Mudavadi who, speaking in Paris soon
after the conclusion of the meeting, said that he was happy that Kenya had
been re-admitted into the international fold after two years of sometimes
frayed relations with the donor community.
Apart
from the resumption of dialogue between the government and the donors, the
main achievement at the CG was, of course, the release of US$170 million in
quick-disbursing aid and pledges totaling $680 million for 1994; another $200
million is projected to be unlocked following the disbursement of the amounts
pledged at the meeting. The release of the last tranche of quick-disbursing
aid will bring the total so far released to $330 million, which will just be
about equal the $350 million withheld at the 1991 Paris meeting. Of the amount
that has already been unblocked, $85 million was released in May that year
following negotiations between the government and then World Bank's
vice-president for Africa, Mr. Edward Jaycox, who had visited the country
shortly after the government declared that it was halting the economic reform
process until the bank and the International Monetary Fund (IMF) re-leased a
substantial amount of balance of payments support to back reforms that had
already been implemented. The first tranche towards the export development
programme, was followed by a Japanese co-financed $75 million released last
month towards the education sector programme. The disbursement of the two tranches
was made after more than six IMF missions separately visited the country
between May that year and October this.
The
last of the IMF missions to the country made it plain that it was satisfied
with the progress so far made in the implementation of key reforms,
particularly in the monetary and financial sectors. The mission , which was led
by the fund’s assistant director in the Africa department, Mr. Hiroyuki Hino,
announced that the government and the fund had agreed on a new policy framework
that would form the basis of discussions for future funding, citing the
abolition of import licensing, re-introduction of the export retention scheme,
the harmonization of the official system, Hino expressed satisfaction with the reforms, effectively
giving Kenya the much-waited bill of clean house keeping. The significance of
the announcement was that, except for several pending issues, the government
had overcome by far the most important hurdle in its bid to win donor support.
There
was an immediate pay-off in favour of the government as a result of the
positive nod given by the IMF Several bilateral donors, particularly Germany and the United States of
America.
But Mudavadi's
greatest achievement was his ability to initiate changes in the banking
sector. It was a task that clearly required quiet diplomacy within government
and a cultivation of political will from very high up in the country's
political setup. He needed a great deal of political support to stand his
ground on politically sensitive issues such as the restructuring of banks and
financial institutions that were owned by politically well connected
individuals, the strengthening of the management of the Central Bank of Kenya,
and that of the Kenya Posts and Telecommunications KP&T corporation. As
things turned out, the America, took the cue and declared that they would be
supporting Kenya's case at the Paris meeting. The US ambassador, Mrs. Aurelia
Brazeal, said that her government had taken note of the improvement in the
local political and economic environment in recent months, pointing out,
however, that the relations between the US and Kenya were built on much more
than aid. Her then German counterpart, Mr. Bernd Mutzelburg, who all along had
been viewed as one of the strongest advocates of the imposition of stringent
conditionalities for Kenya, also spoke in favour of aid resumption, saying
that any further delay was likely to worsen the plight of the poorest of the
society. In a gesture of his government's desire to see a quick resolution to
the two-year impasse between Kenya and her donors, the director-general of the
German ministry of economic cooperation and development, Mr. Bernhard
Schweiger, mid-last month negotiated a shs.7 billion aid package covering a
whole range of development programmes. Coming barely weeks before the Paris
meeting, the supportive statements by Mutzelburg and Brazeal clearly set the
tone that most of the donors were expected to adopt at the CG.
As was to be
expected, the negotiations at that week's CG were characterized by an
all-round sobriety, in large part because both sides were eager to mend fences
and put the past two years of bad blood behind them. Chaired by the director of
the World Bank's eastern African department, Mr. Francis Colaco, the meeting
was, in the words of Mudavadi, "the start of the process of rebuilding
confidence". In a carefully worded
communique reflecting all shades of opinion but at
the same time embracing a positive settlement, the CG spelt out the conditions
under which both sides had agreed to hammer out an agreement. The starting
point for the donors was the policy framework paper (PEP) negotiated last month
between the IMF and the government, and which outlines progressive reform
measures taken since 1991 as well as those that remain to be tackled between
next year and 1996. The donors noted that the PEP "represents a bold and
comprehensive programme that could be the start of a process of sustained and
accelerated expansion in the economy which, over time, would lift the vast
majority of Kenyans out of poverty".
While praising the
government for progress made in several areas, notably in the reform of
strategic and non-strategic public enterprises, public expenditure rationalization
and the creation of an environment that is more conducive to the growth of the
private sector (including the liberalization of maize pricing and
distribution), the donors were hopeful that similar resolve would be exhibited
in the deficit areas. These include the civil service reform, completion of a
national environmental action plan as well as a poverty assessment plan. The CG
stressed that, in order to give it weight, "wider public exposure and
participation", the PEP should be drafted to a sessional paper and presented
for debate in parliament. This, Mudavadi explained, was already in the pipeline
to ensure that the reform process becomes better rooted. A similar assurance
was given to the donors regarding their concerns that "legal action
against those involved in currently known cases of corruption, including fraud
and the embezzlement of public funds, has been definitely too slow". Of
particular concern to the donors were the multi-billion shilling Goldenberg
scandal and the Rural Development Fund (RDF); Mudavadi said that, while investigations
into the Goldenberg scandal were still incomplete, more than 100 other cases
involving corruption, theft and embezzlement of public funds had been handled
in courts while several were pending. He also informed the CG that, with
further liberalisaton and deregulation of th economy, coupled with the reform
of th parastatal sector, the civil service and th financial sector, incidents
of corruptio and blatant theft of public funds woul be curbed drastically.
The evolution of
democratic institu tions since last year's historic election was also singled
out for praise by donors, who noted that lack of good governance and widespread
human rights violations were some of the causes of the 1991 falling out between
Kenya and the donors. The bilaterals commended the government for creating a
conducive environment for the growth of the opposition both inside and outside
parliament in addition to the enlargement of the freedoms of speech and
assembly. However, the government's inability to grapple with the seemingly
intractable ethnic violence that has gripped several parts of the country was a
matter of concern for the donors, who told Mudavadi that it was paramount that
the government defuse "the underlying tensions and deal with the unrest
through an even-handed application of the law". They nevertheless
concurred with the minister's view that the $23 million United Nations
Development Programme-backed programme that targets victims of the ethnic
violence was a good starting point for a lasting solution to the violence. The
proposed programme, which the government has given full support, is designed to
facilitate the resettlement and rehabilitation of the thousands of victims
displaced from their homes as a result of the ethnic clashes.
There was also a general consensus among the donors of
the need to help the government tackle the damaging impact of the recent
drought on this year's cereal crop. In his brief report to the meeting,
Mudavadi had indicated that following three consecutive years of unfavourable
weather, the government urgently required close to $200 million worth of food
aid to bridge anticipated shortfalls of 1.85 million tonnes of food between
last July and September next year. An equally urgent issue that the donors
addressed themselves to was that of Kenya's mounting debt arrears, which had by
this month accumulated to $700 million. It is not clear how much of the monies
set to be released after the Paris meeting are likely to go towards servicing
debt arrears, but Mudavadi assured the
donors that the government would soon conclude an arrangement that would entail
equal treatment of all the affected creditors. Though it was not ,proved at the
meeting, donor concern Kenya's ability to honour its debt that was, in fact,
one of the major reasons why the donor community agreed to the resumption of
quick-disbursing aid; a key condition set by most bilateral for continued
assistance is that the government ensures that it embarks on clearing its debt
arrears.
Besides not wanting to see Kenya run into even deeper
foreign debt or a serious balance of payments crisis, the Paris breakthrough
between Kenya and the donor community was predicated on the valid fear that
having put the country on a two-year probationary period, during which time the
government fulfilled part of its commitment, the donors would share the blame
if the economy? deteriorated further. Another widely held concern was that
failure by the donors to support the reforms so far would dampen the
government's morale, possibly even compel it to roll back on arreas where
considerable progress had been made. Such an action, while seeming only to hurt
the country, would equally hurt the donors that wanted Kenya's reform programme
to succeed. According to an expert, who aptly notes that there have never been
winners but only losers where donors and debtors engage in confrontations,
Kenya's donors were particularly wary of the fact that continued withholding of
aid was tending to push the country to a point where even the socio-political
environment was becoming tense, a situation that is inherently explosive. Thus,
while the release of aid will certainly restore economic stability, it will
also significantly redress many of the socio-political tensions that were building
up in the country. It was a diplomatic coup for the George Saitoti, had left
the Treasury at minister for finance, Mr.Musalia a point when relations with
the donor Mudavadi. After more than two
community were at an all-time low.
Whispers in the
donor community had it that negotiators had complained that his having been
named in cases of alleged corruption made him adopt a defensive attitude during
negotiations. It was said that he preferred to deal with generalized issues of
economic reform as opposed to discussing the culpability of individual public
officials in cases of alleged corruption.
Mudavadi was only two weeks old at the Treasury when he
was called upon to announce of the most momentous policy reform measures,
giving concessions in an area that the government had in the past proved
hesistant to act on and sending signals that full liberalisation of the foreign
exchange control system would be only a matter of time. The minister announced
that the government had decided to extend the foreign exchange retention system
to cover tourism and sectors exporting services such as transport and
insurance. With that new decision, a fairly large proportion of the economy's
foreign exchange earnings now operated outside the purview of the control
system. Export retention schemes had earlier been announced for the
horticultural sector (100 per cent) and the tea and coffee sectors (50 per
cent). The minister also announced the introduction of an inter-bank market for
foreign exchange from where all importers were expected to access foreign
exchange. For the first time in the country's history, importers were now
expected to buy foreign exchange at a market-determined price. What ensued
following the policy announcements by Mudavadi were changes and swings in
macro-economic indicators of titanic proportions. The country plunged into an
unprecedented period of macro-economic instability, and the upward pressure on
consumer prices proved to be increasingly pervasive. Indeed, the country was in
the brink of experiencing the infamous "IMF riots". Mudavadi was the
on the spot.
But even as the minister was still grappling with the
situation, issuing clarifications and statements and expounding on the
justification for the policy changes he had made, he was called upon towards
the end of March to make an about-turn and to shoot down the very policies he
had been defending. At a news conference at the Treasury building, Mudavadi announced
that the government had, with immediate effect, abandoned the IMF/World Bank
prescriptions because, "they were given without moral or material support
by the donor community". He announced that the government would renege
on policy performs prescribed by the donor community, charging that the fund
and the bank were demanding action upfront while remaining completely oblivious
to the hardships their policies were causing the country. Kenya had been
plunged into a confrontation with the World Bank and the IMF, causing it to
face the prospect of isolation by the donor community, and Mudavadi had to be
the harbinger of the bad news. The stand-off between the donor community and
the government did not last long, however. In mid-May Mudavadi announced
far-reaching economic policy changes, reintroducing the inter bank foreign
exchange market and completely abolishing the import licensing system that has
been in place or the last 30 years.
Government
implemented even the reforms that pundits had predicted would be
unimplementable. Two of the so-called political banks, namely Exchange Bank
Ltd. and the Pan Africa Bank Ltd. were struck off the register; while owners of
Transnational Bank, were forced to repay monies they had irregularly borrowed
from the institution. The directors of the bank were also forced to put more
money into the bank's capitalization and to allow it to meet prudential
requirements of the. Banking Act. The replacement of Mr. Kipng'eno arap Ng'eny,
the politically-powerful chief executive of the KP&T, and that of the
former governor of the Central Bank of Kenya, Mr. Eric Kotut, convinced even
the most sceptical of doubting Thomases that the government was serious about
implementing economic reforms.
The challenge to Mudavadi in the coming months will be
to continue the path of reforms with resoluteness. Even though the contents of
the performance framework paper" which sets out the economic reforms the
government has pledged to implement has not been made public, a major challenge
will be how to bring down the budget deficit. As long as the deficit remains
large, the interest bill for servicing domestic debt will continue rising, and
the government budget will continue swallowing the economy's meagre savings.
This year, the deficit will be 6.1 per cent of GDP, a figure that is far from
the 2 per cent of GDP which was set at the beginning of the financial year.
Presently, the government has pledge that it will bring down the budget deficit
figure from the level of 6.1 per cent of GDP to 2.9 per cent in 1994/95, and
further to 2 per cent in 1995/96. It is an ambitious target indeed, in view of
the fact that the economy will in the coming months be faced with major claims
on its resources. The government will need substantial resources to clear the
debt arrears that have accumulated since the suspension of aid in 1991. The
government will also have to devote large amounts of budgetary resources to
import food to meet a projected shortfall in maize production . It has been
estimated that there will be a shortfall of 1.85 million tons of maize between
July this year and September next. The total cost of importing these quantities
of maize is estimated at about US$200 million.
Even though many reforms have successfully been
implemented in the financial sector, an important area of concern that will
continue to be a source of instability to the banking system is the heat in
the building and construction sectors. To achieve a stable financial system,
the government will have to come up with ways of saving financial institution
from real estate induced disaster. Low interest rates in 1987 and 1988 and a
boom in the demand and prices of real estate during the period inspired over
investment, with Financial institutions willing to risk large exposures to the
sector. Nairobi resembled one single construe -tion site as there appeared to
be craze for the building of huge shopping complexes, hotels and office
plazas. Even as recessionary conditions began creeping in the early Nineties,
the building spree went on. Today, demand for property is at its lowest.
Although prices are still high the values bear no relations whatsoever with
supply and demand conditions, which have been such that some politically
influential.
The period between 1991 and 1993 will go down in Kenya's
politico-economic history as perhaps the most tumultuous since Independence with
the main focus being the stormy relations between the country and its most
important bilateral donors. Beginning with the now famous November, 1991, Paris
consultative group meeting that suspended close to US$350 million worth of
quick disbursing aid to Kenya, the relations at one time deteriorated to the nadir as the government
suspended negotiations with the World Bank and the International Monetary Fund
(IMF). That was in March this year when, exasperated by the World Bank's
failure to release funds to back far-reaching economic reforms already
implemented, the government scrapped several key reform measures developers
have had to sell their units to government ministries. Many customers of
banking institutions that financed the real estate craze are feeling the heat
and many of their have had brushes with inconveniency.
A number of policy changes that have
been implemented in the financial and monetary sector will also require fine
tuning. Central Bank will have to maintain a high cash ratio and devise more
watertight mechanisms of ensuring that the prescribed ratios are honored by
institutions. Central Bank and the Treasury will also have to fine tune open
market operations. And, in order to make certain of financial discipline in the
non-bank financial institution sector, the Central Bank will have to monitor
liquidity ratios more strictly.
With regard to the management of government expenditure
future relations with the donor community will depend on success in
implementation of the civil service reform programme, which was launched a few
months ago. The government will have to continue the freeze in employment on
new staff.
The speech was
very important both to Mudavadi and Kenyans because the Country and its people
were starving not only that it was for the first time youthful finance Minister
from African to convince international community at Paris Club
It received coverage ever given to African Finance
Minister local media print BACK FROM PARIS WITH MONEY, VISTING KENYAN MINISTER
CONVINCE INTERNATIONAL COMMUNITY,NO MORE STARVING IN KENYA, WELL DONE MUDAVADI
and other numerous sub headlines
Friend of mine a
historian from Oxford University told me
that he plans to includes the speech in his forthcoming book Titled great
speeches from Africa
Kass weekly will next week come out with the first over researched
article on Uhuru Kenyatta the fighter
and his historical speech at Serena hotel
after 2002 general election.
FRANCIS ILAHAKA IS CULTURAL WRITER CURRENTLY WORKING ON
ABOOK MAKING OF KENYA PRESIDENCY FROM KENYATTA TO MWAI KIBAKI
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