Northern Corridor Gets $207m From Donors
By PETER MUNAITA 
THE EASTAFRICAN 
PRIVATISATION, infrastructure and governance will be the main beneficiaries of a record $4.1 billion committed by donors during a consultative group meeting on Kenya held in Nairobi two weeks ago. 
The EastAfrican has established that projects earmarked for support include Northern Corridor transport improvement ($207 million), privatisation and private sector development ($75 million), Nairobi Water and Sewage Institutional restructuring ($20 million) and justice and integrity support ($20 million). 
The sectors earmarked for support happen to be those in which the International Monetary Fund (IMF) has imposed tough compliance parameters for the government if it wishes to continue drawing on a $253 million poverty alleviation kitty approved three weeks ago. 
The projects are described by the World Bank as being in the pipeline, indicating that they could be halted should the government fail to comply with IMF conditions. Other controversial projects that were active before donors withdrew support for Kenya are also in line for either new or renewed funding. 
They include two HIV/Aids projects valued at $100 million, the economic and public policy reform credit ($150 million), the energy sector reform and power development ($125 million), the Nairobi Mombasa road rehabilitation ($50 million) and the $115 million Kenya Urban Transport Infrastructure Project (Kutip). The latter was halted under a cloud when World Bank officials were implicated in corruption two years ago.  
Apart from the projects in the pipeline, other activities to benefit from the renewed donor confidence in the country were approved from 1996. Some projects that were on the pipeline, however, have been dropped due to "duplication," sources said. They include district rural road network rehabilitation, for which donors were considering $40 million, and the basic education initiative, which was also to require a similar amount. 
Sources said the rural roads upkeep would be covered under the new constituency development fund which is being catered for by the Consolidated Fund with each constituency getting Ksh20 million ($250,000) a year, some Ksh.4.2 billion ($52.5) annually for the country's 210 constituencies. The basic education initiative, has been absorbed under the free education initiative for which the World Bank gave $50 million earlier in the year. 
Announcing the unprecedented three-year aid package, Finance Minister David Mwiraria said aid was predicated on the government pursuing economic reforms, denying that there were political conditions like the sacking of some ministers. 
The conditions include specific actions against corruption, legislation on disposal of public assets, sacking of 40,000 civil servants and freeing of the financial sector from executive control. 
Last week, the Central Bank published various charges that banks subject current account holders to which – under a law ignored until the last budget, are subject to approval by the Ministry of Finance. This is seen as executive interference in a sector which has paid heavily through bank collapse and bank loans by what came to be called political banks. However, the IMF seeks full service-cost disclosure from the banks to help customers pick the best deal from Kenya's 43 banks. 
The IMF's first deputy managing director, Anne Krueger, said in Nairobi that the government had committed itself to reform the public service, control public expenditure and reduce its role in many areas of economic activity. However, she added that implementation was now "crucially important" in getting the ambitious economic reforms underway. Specifically, she singled out continued action on corruption and evolving of measures to improve governance as critical, noting "attitudes do not change overnight." 
She asked the government to "restructure expenditures to target the areas of greatest need more effectively" and to "strengthen Kenya's financial sector so that it can play a more effective role in the allocation of resources," measures that Mr Mwiraria told parliament later were underway. 
"I also urged the government to consider faster progress towards trade liberalisation, which the Fund believes is an important factor in accelerating growth," said Dr Krueger. This condition has met with opposition from analysts who equate this with exposing Kenya's impoverished farmers to competition from developed countries, despite Mr Mwiraria's insistence that agriculture will not be hurt.  
Dr Krueger also announced that the Paris Club creditors had provided financing assurances for another debt rescheduling for Kenya, which will free up significant resources for poverty-reduction expenditures. The debt reprieve, expected next year, will be the third for Kenya following two others in 1994 and 2000. The last saw the rescheduling of $300 million in arrears with a cut off date of 1991, out of $2 billion that Kenya owed the 13 Paris Club members. 
Monday, December 8, 2003 

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