Kenya's Rejection of More Reforms Marks Victory for the Privileged

KENYA'S sudden rejection this week of demands for more economic reforms from the International Monetary Fund (IMF) and the World Bank follows a high-level political power struggle between Kenyan reformists and hard-liners anxious to protect their influence and wealth.

The hard-liners won, according to diplomats, international economists, Kenyan opposition leaders, and a senior Kenyan official. More reforms - such as trimming the government payroll and limiting questionable loans by Kenya's Central Bank - would have loosened the hard-liners' grip on patronage and government funds, these sources contend.

"What you're seeing now is keeping the status quo for the favored few," says Robert Shaw, a Kenyan businessman and assistant secretary for public policy and economic affairs for FORD-Kenya, one of the main opposition parties.

But this is not the public explanation given by the government of Kenya.

Officials here say the March 22 rejection of the IMF/World Bank reforms was based on a concern for the average Kenyan. Skyrocketing food and fuel prices, linked partially to earlier steps to follow IMF/World Bank demands to decontrol prices, had raised some fears of possible urban riots. Food riots led Zambia to reject IMF/World Bank reforms in 1987, though the reforms were resumed a few years later.

In a statement earlier this week, Kenyan President Daniel arap Moi called the IMF/World Bank reform program "unrealistic," and said it was leading Kenya down a "ruinous" path. He vowed to restore his own program with more state control.

The government quickly reimposed limits on the purchase of dollars and other hard currencies with Kenya shillings. On March 24, the government restored price controls on gasoline and cooking fuel, reducing their retail prices by at least 6 percent.

A SENIOR Kenyan official acknowledges "differences of opinion" among high-level officials, adding that the anti-reformists were "vocal" in guarding their "privileges."

But there also are problems in the economy, the official says. He blames the IMF for "loading too many things" on the back of the Kenyan government at a time when opposition parties were establishing themselves.

"You clearly can't risk in the political arena something that hands all the cards to the opposition," the official says.

The reform issue was taken up in Kenya's parliament March 24, the first full day of business since Kenya's Dec. 7 multiparty election. Mwai Kibaki, chairman of the Democratic Party, said Kenya needs IMF/World Bank help. "We should not mislead ourselves that we can go it alone," he said in remarks that, intriguingly, were given more prominence in the government newspaper, the Kenya Times, than in the two independent dailies.

In November 1991, the World Bank and all other Western donors agreed to freeze new loans to Kenya pending further economic and political reforms.

The government has made major economic reforms. But donors insist not enough has been done, and that what was done was carried out haphazardly, with little effort to curb corruption.

International reaction to Kenya's rejection of the reforms was mixed. A United States official called the rejection "disappointing."

But David Whaley, the local representative of the United Nations Development Programme, says: "The government felt economic reform without strong financial support from outside was economically disastrous.

"The question now is, who pieces together a package which maintains the principles of reform in the interest of the Kenyan people ... while insuring [the country] does not collapse into chaos and violence."

Donors remain especially concerned about a massive increase in the money supply in Kenya last year, brought about by the government's printing extra money and by questionable loans made by the Central Bank to banks run by Kenyans with high-level political connections.

"No liberalization [economic reform] program can survive in that kind of macro-economic environment," says an international economist, who requested anonymity.

Kenyan officials are continuing to meet with World Bank officials. And an IMF team will visit Kenya in April for a periodic review of the economy.