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Lending to Kenya
A Letter to the Editor

By G. E. Gondwe
Director, African Department
International Monetary Fund

The Economist
September 16, 2000

Sir:

Your article on Kenya's IMF program states correctly that there are strict conditions attached to the loan. But this does not represent "a virtual surrender" of Kenya's sovereignty, nor does it imply that the country is being treated more "firmly" than other loan recipients.

Since mid-1999, the government of Kenya has made progress in tackling corruption and improving governance, and the IMF has acted as an advisor in the governance area, drawing from the experience of its membership. To bolster progress in this key area of reform, the IMF program includes two structural benchmarks, the first pertaining to a bill including an ethics code for public officials and the second to an Anti-Corruption and Economic Crimes bill. These are important new elements in an IMF program, and reflect the institution's concern with improving governance, of which the beneficiary is meant to be Kenya's population at large. However, as with many other IMF programs, the Kenyan program requires that the legislation be submitted by the government to its parliament. But it is the country's parliament which remains the final arbiter of which laws are passed and in what form, and therefore there is no surrender of Kenyan sovereignty.

Several other features of the Kenyan program that your article mentions are similar to those found in most other IMF-supported programs. Provision of daily balance-sheet information is not unique to the Kenyan program. Likewise, the release of funds in tranches after periodic reviews is a standard feature of IMF programs. Nor is the Kenyan program distinguished by an unusually long list of conditions attached to the loan. And, in any event, the majority of these conditions pertain to one of the IMF's core areas of responsibility, namely fiscal reforms.

Finally, your article fails to mention that Kenya's loan was provided under the IMF's Poverty Reduction and Growth Facility. As with other loans under this new facility, the Kenyan loan was approved only after a consultation process led by the Kenyan government with extensive participation by the private sector and non-governmental and community-based organizations.




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