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Kenya welcomes IMF

$220 million loan

NAIROBI: The Kenyan government has applauded the granting of an International Monetary Fund (IMF) loan worth $216 million while reiterating its commitment to further economic reforms.

"The government is fully committed to ensuring that the reform programme will be implemented successfully and that the ESAF (Enhanced Structural Adjustment Facility) loan will be fully disbursed", said a Finance Ministry statement.

An initial instalment of $36.65 million would be disbursed immediately, its said.

The balance of $183.23 million is scheduled to be disbursed semi-annually, in five instalments of $36.65 million each subject to successful implementation of economic reform measures, said the statement signed by reformist Finance Minister Musalia Mudavadi.

The loan carries interest of 0.5 percent per annum and is repayable over 10 years with a grace period of five years.

It will fund macroeconomic and structural reforms to be implemented over the next two years.

Nairobi-based diplomats said granting of the loan would be a key factor in triggering the release of aid held over out of frustration at Kenya's failure to tackle corruption, human rights abuses and political reforms.

Last year Germany slashed its aid to Kenya by $33 million for 1995-96 over worries about stagnation on political reforms.

Denmark which has spearheaded a campaign against corruption after discovering a large chunk of its own aid had been misappropriated fixed its disbursement for the next three years at $22 million per year.

In granting the loan the IMF said: "Kenya has achieved a major economic transformation over the last three years".

Direct controls on domestic prices, internal marketing and external trade have been eliminated, while exchange rates and interest rates are fully-market determined it said.

However the IMF issued a cautionary note that progress on economic reforms had slowed in 1995 and that some setbacks had occurred.

"The key to translating Kenya's recent economic gains to high and sustained economic growth is to enhance the confidence of private investors", the IMF said.

Out-going US Ambassador Aurelia Brazeal, in a speech on Friday to the Law Society of Kenya, echoed the concerns of many Western donors when she called for tougher action to tackle corruption, one of the biggest impediments to economic growth.

"Even as we talk about future economic growth the ugly spectre of corruption raises its head, a ruinous barrier on the way to a prosperous Kenya of the future.

"This pernicious form of short-term greed robs Kenyans not only of the present but also of their future possibilities as it destroys the business and investor confidence so necessary for long-term growth and development", Brazeal said.

She welcomed a recent crackdown on corruption at Mombasa port as "long overdue" but stressed that much more needed to be done. Economic growth in Kenya last year was five percent with six percent growth hoped for this year.

Approval of the IMF loan followed a successful round of negotiations with Kenya's main donors at the consultative group meeting in Paris in February, said Mudavadi.-Reuter