From Africa Recovery, Vol.11#2 (October 1997), Briefs page

European Commission joins IMF in withholding aid to Kenya

The European Commission postponed a $90 mn loan to Kenya in September, pending guarantees that the money -- earmarked for road repairs -- would be used "properly." The postponement came just over six weeks after the International Monetary Fund (IMF) suspended a three-year $220 mn enhanced structural adjustment facility (ESAF) loan, accusing Kenya of failing to tackle corruption.

Commission spokesman João Vale de Almeida complained of Nairobi's poor record with human rights and democracy, as well as a general "lack of transparency." He said the funds will be released when the required assurances are received.

Kenya had already come under pressure in August when the World Bank warned that unless President Daniel arap Moi's government tackled corruption, it would substantially reduce its aid. Kenya had been relying on Bank funding to renovate its dilapidated road network and modernize the energy sector, which is struggling to meet demand.

The government responded to the IMF-World Bank criticism by committing itself to "expeditiously" address their concerns. It promised to take action on energy sector management, including legislation to provide for the reform of the sector and the establishment of an autonomous regulatory board. It also pledged to establish accountability in financial management and create an autonomous anti-corruption authority.

Since then Kenya, scheduled to hold presidential and legislative elections by the end of the year, has experienced unrest and violence. This has deepened the sense of political and economic crisis, resulting in high interest rates and instability of the Kenyan shilling, as well as a decline in the tourism industry. The country's highest single foreign exchange earner, tourism brings in about $400 mn dollars a year and employs some 150,000 people. After a two-year slump, the industry was expected to recover in 1997, but the recent political unrest has dashed these expectations.

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