Nairobi halts IMF and World Bank reforms: President Moi says it is impossible for Kenya to meet the conditions for western aid

MOUNTING the strongest challenge yet to recent Western policy on Africa, Kenya has abandoned its economic reform programme and rejected the International Monetary Fund and the World Bank, saying it wants to go it alone.

Once the closest ally of the West in Africa, Kenya is the first country to turn its back on Western aid since Zambia tried unsuccessfully to break out of the IMF straitjacket in 1986.

The West has found an unlikely ally in the Kenyan opposition parties whose members stormed out of the parliament yesterday at the reopening ceremony held by President Daniel arap Moi. Part of their protest was at the government's decision to abandon the economic reform programme.

On Monday in separate statements President Moi and the Finance Minister, Musalia Mudavadi, announced that the Bank and the Fund had refused to honour their pledge to Kenya and resume aid. The economic reform programme was put into reverse with the reimposition of controls on foreign exchange and prices. The government says it is particularly concerned at the 40 per cent interest rates which it says will ruin agriculture in Kenya. Mr Mudavadi said that the Bank's reform programme would lead to food shortages and mass unemployment. Last week President Moi declared the Fund and Bank policies 'dictatorial and suicidal'.

The West stopped aid to Kenya in November 1991 insisting that Kenya liberalised its economy, curbed corruption and instituted political reform. Kenya held elections in December last year but a delegation from the IMF left Nairobi last month saying economic reform had not gone far enough to justify restoring aid. Kenyan officials, however, said the donors had 'moved the goal posts' and that Kenya had gone a long way towards meeting the donors' demands. One Western diplomat said: 'There never were goalposts in that sense. It is more like being a python. We will keep squeezing the government.'

The squeeze has snapped rather than bent Kenyan resolve. Mr Moi's clearly announced decision to abandon the reform programme suggests more than a flash of ill temper. British officials appear to believe that the announcement was a tactical move to secure easier economic reform targets. London and Washington believe there is no alternative to working with the international financial institutions and the Kenyans will be forced to return to the fold. The official public line will continue to be: follow the Bank and the Fund or no aid. 'I can't believe the Kenyan government can see a future without the Bank, the Fund or Western aid,' said one diplomat. But other Western donors appear less certain that the Kenyan government was indulging in brinkmanship. 'I am not sure if this is a game play . . . I think Moi may be serious,' said one senior official of the donor community.

The French believe that Mr Moi is sincere and the French ambassador to Kenya, Michel De Bonnecorse, said last week that the Kenyan economy was in mortal danger and that aid should be resumed. This may be the common French tactic in Anglophone Africa of taking a different line to Britain but the French view is backed by British businessmen. The East Africa Association which represents British business interests in Kenya has written to Baroness Chalker, Minister for Overseas Development, urging her to resume aid.

Although Kenya has a debt of dollars 7,014m ( pounds 4,707m) which represents nearly 90 per cent of its gross national product, it holds several important political cards. It is the base for the combined United States and United Nations operation in Somalia. A destabilised Kenya would put that operation in jeopardy. Kenya has also been a loyal pro-Western capitalist country since independence. It is ironic that Kenya, of all countries, should now be leading the charge against the West on economic policy.

On the other hand Mr Moi's government is out of favour with the West because of corruption and tribalism. Once that would not have bothered the West but, with the Cold War over, London and Washington no longer need allies like that. The December election was won by Mr Moi's party but the election was seriously flawed, and afterwards Mr Moi seemed to revert to autocratic rule.

If Mr Moi is serious in his escape attempt from the economic regime of the Bank and the Fund, there are other African countries who will want to follow Kenya - 27 countries in sub-Saharan Africa have now adopted agreements with the IMF and the Bank on economic policy. Others are shadowing those policies. The Western donors will therefore try to tough it out. They cannot allow Kenya to establish a precedent. On the other hand, if Mr Moi is serious, can the West allow Kenya to hit the buffers?