The late President Moi with a world Bank official In 1993, months after the general election, Kenya’s inflation figures had hit a record high of 50 per cent and the government was going bust. The Gross Domestic Product (GDP) had stagnated for three years and agriculture — the country’s economic mainstay — had shrunk to an annual growth rate of 3.9 per cent. To make matters worse, bi-and multi-lateral donors had suspended aid in the wake of the 1992 General Election, whose results had been contested by the opposition. From 1991, the World Bank and the International Monetary Fund (IMF) had been going back and forth with the government trying to press Kenya to introduce structural adjustment policies to invite investors. At the time, newly appointed Finance Minister Musalia Mudavadi led a government delegation to Europe on a round of shuttle diplomacy. The trip took the team to a donor convention in France and later to Britain, where Kenya engaged the lenders in a spirited attempt to convince them that the country was undertaking proposed economic and political reforms. Mr Mudavadi and his colleagues told donors “there will be no backtracking on reforms this time and that Kenya will turn to dialogue in all areas of difficulty”. In his book Soaring Above the Storms, Mudavadi says President Daniel arap Moi gave him the carte blanche to negotiate with the donors and his personal commitment that the proposed economic reforms would be implemented. He further assured donors that Kenyans were aware the reforms would have some painful consequences in some areas, such as ongoing civil service retrenchments meant to reduce the wage bill. With Moi’s blessings, Mudavadi says, he began to clean the mess in the finance sector created by runway impunity, which also had to do with the Goldenberg scandal. “It was all chaos … the schemes had been seriously abused. The country was basically bankrupt. It was on this basis the President made the decision to carry out changes at the very top of the CBK,” he writes. Economic reforms The government followed through its words with a raft of economic reforms, which entailed privatising State assets, eliminating price controls, removing foreign exchange controls and retrenching civil servants to reduce the wage bill. Micah Cheserem was head-hunted from Unilever Malawi to head the CBK where he worked with the IMF on a debt restructuring programme. Soon after, however, […]
