While the Kenyan economy may be very different from what it was during the Moi-Kanu era, the one thing that remains constant is that you can be sure any assistance from the IMF and World Bank comes with strings attached, or conditionalities.
In calm non-threatening tones, the IMF spells out what conditionalities mean on their website and add that “Conditionality is included in financing and non-financing IMF programmes with the aim to progress towards the agreed policy goals.
“Conditionality helps countries solve balance of payments problems without resorting to measures that harm national or international prosperity.
“When a country borrows from the IMF, the government agrees to adjust its economic policies to overcome the problems that led it to seek financial assistance. These policy adjustments are conditions for IMF loans and help to ensure that the country adopts strong and effective policies.”
In other words, member countries that borrow from the IMF have the primary responsibility for selecting, designing, and implementing policies to make their economic programme successful.
The programme is described in a letter of intent, which typically includes a memorandum of economic and financial policies for a more detailed description of the policies. The programme’s objectives and policies depend on a country’s circumstances.
Take, for instance, the introduction of cost sharing in the education and health sectors. This was recommended by a working party on government expenditure headed by the then Finance Permanent Secretary Philip Ndegwa and had most probably been suggested by the World Bank.
The working party’s report would later be cited in a 1986 World Bank report.
The final Ndegwa report said Kenya would have to introduce a system through which beneficiaries of services would have to pay at least part of the cost of these services. This was the concept that would become known as cost sharing.
In education, a certain amount of cost sharing was already being applied at the primary and secondary levels through school fees and other charges but it was when the implementation of SAPs hit the country’s four public universities, and in particular the pockets of the students, that the brewing crisis hit home.
The four public universities at the time were University of Nairobi, Kenyatta University, Moi University and Egerton University.
University students in Kenya began receiving pocket money – popularly known as boom – in 1974. This was during the period when the University of Nairobi and its constituent college Kenyatta University College were the only universities in the country.
The dispersal of this allowance followed the creation of the University Students Loan Scheme, prior to which students qualifying for university education used to get direct bursaries from the government. However, the bursaries did not cater for pocket money, students had to make personal arrangements in this regard.
According to a 1991 story in the Weekly Review news magazine, the Students Loan Scheme was established with a view to creating a revolving fund through which most students could be assisted in meeting the expenses for accommodation, food, books and essential personal effects.
Over the years the loan scheme was restructured in such a way that money for food, accommodation and tuition was paid directly to the university while that intended for books and other learning materials was given directly to the student as boom.
The amount of boom given to each student rose every year. So, for instance, in the 1984/85 academic year, the 7,150 undergraduates at the four national universities received about KSh 55 million in boom alone.
By the 1987/88 academic year, there were 15,020 undergraduates in the four public universities and the government spent about KSh 139.6 million shillings on boom.
This was getting to be very expensive and in 1988 a presidential working party report on education and manpower training under educationist James Kamunge recommended major changes in its administration in line with cost sharing.
While the allowance was originally meant to assist students obtain books and stationery, most students had used it for purposes quite unrelated to their studies. Indigent students depended solely on boom to enable them to buy clothes and other personal effects, while others used it to assist in educating younger siblings.
On the other hand, many students from well-to-do families treated the money as a personal entertainment allowance, as witnessed by the wild parties and spending sprees whenever boom had been paid out.
In those days, Kenya was one of very few countries in the world that extended loans to cover all university expenses including food, accommodation, books and even pocket money to all qualifying students regardless of their financial backgrounds.
Inevitably, almost four years later, increased pressure from the World Bank and the IMF pushed the authorities to get round to implementing some of the changes suggested by Kamunge.
The government made its move in June 1991 as it was paying out about KSh 415 million to the 40,000 undergraduates. That month it was announced that students at the four public universities would be required to repay the universities KSh 6,000 per year.
To students this was the beginning of the end of the boom allowance and they immediately began a series of protests leading to the closure of both Moi and Kenyatta universities. The students said that the new loan structure was provocative and had been introduced without sufficient consultations.
Professor Philip Mbithi, who would later be promoted to head the civil service, was at the time Vice Chancellor of Nairobi University as well as chairperson of the Joint Admissions Board (JAB), which included the heads of the three other public universities.
Mbithi, and his colleagues, the other vice chancellors, held a day-long crisis meeting after which they called a news conference at which Mbithi warned the protesting students that their admissions “could be withdrawn without further reference to them”. He said the time had come for each student to contribute to their own higher education by paying fees and boom would now be brought into proper perspective.
On the students’ fears that the restructuring of the allowances meant a breach of contract, Mbithi told them to read the Terms and Conditions in the small print of the loan forms they had filled.
These Ts and Cs stated in part that the contract terms could be revised either upwards or downwards and that the contract allowed the government to vary the terms of the loan in keeping with the public interest and its economic inability to meet any terms.
In the end, the spending cuts spurred on by the SAPs led to serious underfunding of the education sector which impacted on the provision of quality services. The underfunding and commercialisation of education led to a brain drain of skilled professionals seeking better opportunities abroad.
The privatisation of public services such as education and health effectively meant the commercialisation of such services, making them less accessible to low-income individuals and families.
A couple of years earlier, Kenyans had witnessed another example of the IMF prescribing treatments to the economy but making it look as though it had been the government’s mission all along. Towards the end of July 1989, Kenya’s then Finance Minister, Vice President George Saitoti, received the then World Bank VP and Chief Economist Stanley Fischer at his Treasury office.
Fischer was ostensibly paying a courtesy call, but from the things that were said by both he and Saitoti at the meeting, it was very clear Fischer had come with a script from Washington.
The script was for Saitoti to read and thus give the impression that the borrower (Kenya) had chosen and designed an economic policy it was about to implement without any coaching from Bretton Woods. At the meeting, as Fischer sat by nodding encouragingly, Saitoti told reporters that the Kenyan government was keen on the proper management of both monetary and fiscal policies. He said this would make the public sector more efficient and insisted that any future decisions with regards to the appreciation or devaluing of the Kenyan shilling would be made by the government and would happen as a result of external pressures.
When Saitoti began speaking about the government’s economic management, he was getting to the overarching issue that had actually brought Fischer to town. Saitoti said the Kenyan government’s “prudent management of the economy” had led to the national deficit being cut from 10 per cent in 1980/82 to 4.5 per cent nearly a decade later.
When it was his turn to speak, Fischer made a point of commending the cutting of the national deficit and said that that cut as well as the government’s recent adoption of “realistic exchange and interest rates” were the result of “clear political decisions”.
However, the Moi cabinet appeared split on the issue of SAPs. Opponents to the policies voiced concerns about allowing market forces to play a greater role in the allocation of resources. They argued that reducing the involvement of the state in economic activities to a minimum implied cuts in government spending. Such cuts, they argued, could lead to many thousands of public servants being laid off.
A few weeks after Saitoti’s meeting with Fischer, Labour Minister Peter Okondo made a statement to the effect that SAPs had to fully recognise the needs of local employment, its social effects and political spin-offs.
In a speech at an International Labour Organisation (ILO) conference in Nairobi on Structural Adjustment and Employment in Africa, Okondo said: “Adjustments which lead to socio-economic instability can set off a measure of political problems and must therefore be avoided.
“The problem usually is that the international agencies which advocate structural adjustments do not pay adequate attention to the socio-political problems that their suggestions can cause.”
Okondo said it was important to note that individual countries faced specific challenges which meant that the design of adjustment programmes and the timing of reforms prescribed must reflect a given country’s specificity. He added that the timing of the reforms prescribed must reflect a given country’s special circumstances.
In other words, there should be no one-size-fits-all policy.
By March 1990, there were more voices raised in warning about SAPs. During a meeting of the World Council of Churches in Australia, participants spoke of imbalances in the world economic systems which they argued prevented economic growth and social justice for the poor, while exploiting peoples and nations.
Delegates to the conference argued that the IMF and the World Bank were dominated by powerful industrialised countries and were unaccountable to any international authority. They also said that women and youth would be the most affected by SAPs.
At around the same time, the World Bank and the IMF came under bitter attack from participants at the Economic Commission for Africa (ECA) conference in Arusha, Tanzania as lacking solutions to the escalating economic needs facing African countries.
In response to these attacks, the World Bank’s then representative to Kenya, Peter Eigen, insisted that the SAPs had not failed and were continuing to “achieve the intended objectives” resulting in the improvement of economies in the countries implementing them.
Eigen claimed that reports from the ECA Arusha conference that SAPs ignored human resources in their programmes were mistaken and insisted that the reforms supported projects targeting both the youth and women, saying that fighting poverty was their first priority.
Shortly afterwards in March 1990, US Ambassador Smith Hempstone made a courtesy call on Philip Ochieng, the then editor-in-chief of the Kenya Times group of newspapers, where I was working at the time. Hempstone, who had been appointed late in 1989, was still taking the country’s temperature and made a point of reassuring Kenyans during that visit that US aid to developing countries was unlikely to drop.
However, Hempstone added that the continuity and volume of such aid would depend on how the money was spent. He said so far there had been no “horrendously bad example of misuse in Kenya”, but recipients would have to show that aid was spent on projects designed to benefit more people.
By the end of 1991, Hempstone and other Western diplomats had changed their tune and as well as chiming in on the calls by internal critics for the Moi-Kanu government to open up the political space, the diplomats were urging the liberalisation of the economy as advised by the Bretton Woods institutions.
Until then, the Moi government had stood firm against calls for political and economic reform, saying it would take a few more years before the country was ready for such changes.
However, on 3 December 1991, at a Kanu conference in Nairobi, Moi wrongfooted many a political pundit by yielding to these pressures and announcing the discarding of Section 2A of the Constitution, in effect reverting the country to a multi-party democracy.
What was interesting about this sudden change of heart was that it came just a week after Western donor nations held their Consultative Group meeting in Paris on 25 November 1991.
At that meeting they announced their terms and conditions saying they would suspend new commitments of financial assistance to Kenya and would link future aid to the introduction of economic and political reforms within six months.
By December 14, 1991, Kenya’s Ambassador to the US, Denis Afande, was signing two loan agreements with the World Bank amounting to US$86 million (KSh2.4 billion at the time), ostensibly to consolidate and develop public universities and reform the health sector.
Ambassador Afande claimed at the time that the loan would have a direct and positive effect on the social and economic well-being of Kenya.
In fact, Kenyans had begun to discover that these promises of a wonderful future were not worth the paper they were printed on.
