Cautious welcome for resumed IMF lending

Kenya has welcomed a decision by the International Monetary Fund (IMF) to resume lending, more than a decade after it suspended core lending to the country citing corruption and slow economic reform. The Breton Woods body on Saturday announced that it had approved a three-year US $252.75 million loan for Kenya. In a statement, the IMF said its decision to resume lending to Kenya had resulted from the government's "strong commitment to break with Kenya's past record of uneven economic performance" and bold steps in the fight against corruption in key government sectors. The new National Rainbow Coalition (NARC) government, which came to power almost a year ago, has made tackling corruption one of its priorities. "They [the government] have already taken significant steps in their fight against corruption, with the passage of key governance legislation in May 2003 and the setting up of institutions to enforce the legislation," the statement said. Local economists however cautioned that it was too soon to celebrate, noting there were a string of conditionalities for the Kenyan government to meet if the funding was to continue. Kwame Owino of the Nairobi-based Institute for Economic Affairs (IEA) told IRIN on Monday that the Kenyan government needed to show sustained commitment to reforms over the coming years, if it expected to receive all the funds promised. "The money is being given in batches, which means that trust has not yet developed," Owino said. "The money is also coming with a lot of conditions, which means we might not get all of it, if breaches occur in the process." And Oduor Ong'wen, executive director of the Nairobi-based NGO, Econews Africa, said that the resumption of lending could only benefit ordinary Kenyans if the government set clear priorities to invest in sectors that benefited the bulk of Kenya's absolute poor - about 56 percent of the population. Kenya’s turbulent relationship with the IMF, the World Bank and other international donors dates back to 1991 with the suspension of core funding to the country as part of efforts to pressure the-then KANU government to undertake key economic reforms, including privatisation of several key state corporations. According to the IMF's announcement, the current lending falls under its Poverty Reduction Growth Facility (PRGF) loans, which carry an annual interest rate of 0.5 percent and are repayable over 10 years with a five and a half-year grace period on principal payments.