Sale of NBK, political reforms top on agenda of IMF mission

The status of privatisation of the National Bank of Kenya and the fate of the troubled CharterHouse Bank figure among the top agenda items for discussions with a high-powered mission of the International Monetary Fund that has been having a quiet dialogue with the government since Tuesday last week.

The EastAfrican has learnt that the mission has also demanded an update on the status of the supervisory agreement under which the Central Bank of Kenya oversees the National Bank.

In the case of CharterHouse Bank, the IMF mission has demanded an update of the status of its banking licence, the statutory management and the legal process in court.

The four-man team, led by senior Africa division executive Dominico Faniza, is in Nairobi to conduct what amounts to an audit of performance against reforms on the basis of which the Fund lent Kenya $201 million in June this year.

Going by the set of questions the visiting IMF mission has circulated to various government departments — a copy of which has been seen by The EastAfrican — it is clear that the scope of the visiting mission’s engagement is not only broad, but will touch on politically sensitive reforms.

According to the agenda, the mission has also demanded a conversation on the status of the forensic audit of the National Produce Board and the status of the food subsidy programme that turned out to be such a scandal.

Faced with dwindling foreign reserves, Kenya went to the IMF in March and successfully secured the loan.

The country was at that time in a tight spot, with the government estimating that without support from the IMF, foreign reserves would have fallen by almost $800 million below the previous year’s level.

Kenya needed the money to rebuild its foreign reserves and, therefore, pre-empt a situation that would have seen the Central Bank of Kenya being forced to frequently resort to buying dollars from the market at the risk of precipitating instability in the exchange rate.

The current mission comes against the backdrop of a visit to the country of the IMF managing director Dominique Strauss-Kahn who has been on a charm offensive aimed at improving relations and terms of engagement with East Africa.

A year ago, he was in Tanzania where he proclaimed a new chapter of better relations and engagement with Africa.

Last year, lending to sub Saharan Africa was in excess of $5 billion — almost five times the previous year’s total — most of it in quick disbursing loans to ensure that low-income countries had rapid access to funds.

Interest rates have been low — through 2011, for instance, the interest rate for loans to low-income countries has been set at zero and subsequently at just a quarter of one per cent.

“The conditions on our financial arrangements have been made more flexible,” said John Lipsky, IMF first deputy managing director, in Ghana recently.

In response to the global financial crisis, the IMF approved a general allocation of special drawing rights (SDRs), which disbursed some $250 billion into the world economy, spread across 186 members.