Implication of shift from IMF dependency

We want to see whether policymaking will now enter a wider arena and shift from a narrow regime, where policy choices are reduced to ticking boxes stipulated in those so- called IMF benchmarks.

Let’ see whether policy will shift from too much fixation with coping with short term fiscal tensions, to addressing the productive stupor in which our economy has been languishing in for decades.

More than 10 years of IMF tutelage has only served to cover the urgent need for real and fundamental changes we need to introduce, to cause the economy to create the sort of jobs that can give us secure and rising, living standards.

Lately; the government has been touting macro-economic stability as a major achievement. You see; the Central Bank of Kenya (CBK) foreign exchange reserves currently stand at $9 billion or 4.6 months of import cover; the Treasury Bill has come down to single digit and the exchange rate has been relatively stable in recent months.

These trends are proof that in an economy with structural problems and that has suffered serious shrinking for decades like ours; macro-economic stability only helps you cope with short term problems. It is like taking a palliative while hoping that you are curing a chronic malady.

We can only gloat when we start witnessing significant improvements in decent jobs; in the share of manufacturing to Gross Domestic Product (GDP); in revenue targets and in the uptake of credit by the private sector. We are yet to witness a wave of new business investment; a surge in corporate profitability across all industrial sectors and a mushrooming of new startups.

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With the IMF out of the way; I suspect that the government is going to move quickly to access bail out money from rich gulf countries and to close the much talked about deal, where we are supposed to be borrowing some $1.5 billion from International Holding Company of the United Arab Emirates (UAE).

Gulf countries and rich Arab sovereign wealth have lately been moving aggressively to offer bail out money to African countries facing the twin problems of liquidity squeezes; and persistent credit downgrades by Western credit rating agencies.

New players from the Gulf region are popping out every other day; coming up with innovative and unconventional support mechanisms and structures for struggling and mismanaged countries in Africa. The menu includes oil in-in-kind- assistance, direct budget support and sovereign debt repurchases.

With European and Chinese banks scaling back investments on the continent, the Gulf states are now enjoying their news status as donors.

There will be no easy path to navigating the economy through these uncertain times. I see a trend where non-traditional lenders such as countries from rich Gulf states are marching in; this time; pressing for more privileges and more pounds of flesh in their dealings and negotiations with the government, knowing they hold the upper hand and can therefore set the rules and conditions.

The trend we have observed lately is that the IMF will always come out to oppose the new bail out and survival schemes by mismanaged and struggling African countries with the rich Arab sovereign wealth funds.

A few months ago, the fund criticised the so- called G to G oil deal which is structured along the lines of an oil and gas assistance deal between Kenya and Gulf parties; namely Adnoc, Aramco Trading of Fujaira and Emirates Oil Company.

Early this year, the IMF loudly criticised the bid by Kenya to take the planned $1.5 billion borrowing from IHC od UAE, basing their stand on the view that the pricing was too expensive.

I see a trend whereby struggling African countries facing credit downgrades by Western credit agencies, and more or less locked out of international capital markets being forced to embrace deal with players from the Gulf.

But like the old adage goes; gifts from Greeks come with risks. Gulf countries will demand to be gifted with lucrative contracts such concessions of ports; pipelines; transmission lines and busy and congested road corridors where they can run road tolls.

The writer is the former Managing Editor for The EastAfrican