This week it emerged that the government is in talks with the International Monetary Fund (IMF) on a new lending facility. This comes on the back of an IMF emergency financing facility approved in May to the tune of Sh7.4 billion that was to help the government cover costs related to the Covid-19 pandemic.
Separately, Treasury Cabinet Secretary Ukur Yatani telegraphed the coming economic pain as part of the agreement with the IMF. Public sector jobs will be cut to reduce recurrent expenditures. Important government services will also see retrenchment. And the wider economy will suffer from reduction in government spending on important public goods and services. The fact that we have gone to the IMF, bowl in hand, means we are in an economic ditch. Our collective tragedy is that the government continues to dig. Wasteful public spending and graft continue to be the norm in the Jubilee administration. Which means the coming cuts in public spending will be borne primarily by the least fortunate among us.
As we cut spending on healthcare, education, schools, and agricultural extension services, the politically-connected rich will continue to have access to easy money through dubious infrastructure contracts, power purchase agreements, and dodgy procurement practices. To add salt to injury, the political class is planning a referendum that will cost billions of shillings.
Older Kenyans will remember the pain imposed by the IMF’s structural adjustment programmes. Much of the anger at these programmes has been justifiably directed at the IMF. But the government must also bear the blame for driving the economy into the ditch, thereby necessitating IMF intervention. If the IMF’s solutions are the equivalent of hacking off parts of a car to make it easier to tow it out of a ditch, the Jubilee administration is the drunk driver that, despite multiple warnings over a seven-year period, recklessly drove a car full of passengers into a ditch.
The level of willful economic mismanagement that we have endured over the last seven years is hard to comprehend. Whether one looks at infrastructure spending, the health sector, curriculum reforms in the education sector, or the Big Four agenda, it is hard to understand the Jubilee administration’s end game.
- 1 MPs agree to IMF conditions with new budget directives
- 2 World Bank, IMF add climate change to debt-reduction talks
- 3 IMF approves Sh261b fresh loan for Kenya
- 4 How a string of bad investment decisions dug Kenya neck-deep in debt
Why should a government run by competent individuals play hide-and-seek with institutions like the IMF and the World Bank? How did they imagine they would repay the expensive private loans even as the money was stolen or invested in overpriced and commercially unviable infrastructure projects? Why should these institutions care more about macroeconomic instability than our own elites?
These are the uncomfortable questions we should ask ourselves over the next few months. Foreign institutions cannot care about our economic wellbeing more than we do. The IMF and the World Bank are primarily concerned with maintaining macroeconomic stability at any cost. Their mandate is limited, and does not extend to the political choices that must be made in order to honestly address the structural problems afflicting our wider economy. The Jubilee administration’s economic mismanagement was built on the back of intra-elite collusion to use the budget process as a slush fund. Merely cutting spending here and there, or granting the government a loan facility for a limited period of time are not sustainable solutions to our political elites’ fiscal indiscipline.
Irony, we have been here before. One hopes that this time round IMF negotiations are smart-enough not to be hoodwinked by the Jubilee administration.
-The writer is a professor at Georgetown University