Structural Adjustment in Kenya

Structural Adjustment in Kenya began in 1980 with a Structural Adjustment Credit of $55 million by the World Bank.

Structural Adjustment in the 1980s

Kenya was among the first nations to receive a Structural Adjustment loan from the World Bank, back in 1980. However, during the 1980s, Kenya was notorious for its noncompliance on implementing SAPs even after agreeing to them and taking the associated loan money.

A World Bank account of the ills of Kenya's economy before its structural changes found:

“By the early 1980s, the public sector had become overextended. The "Kenyanization"of industry and the desire to industrialize rapidly had led to the creation of massive public sector ownership, not only in such traditional activities as utilities and transport, but also in distribution and manufacturing. Traditional suspicion of Asian traders and the interest of large farmers had combined to create marketing parastatals, most notably the National Cereals and Produce Board, which could support high producer prices in good times and in bad. Over the years, these parastatals drained the budget and, indirectly, the banking system. Meanwhile, controls on grain movements generated rents for those who granted and obtained licenses. At the same time, the civil service had expanded tremendously, primarily at the lower grade levels. Although real wages stagnated or fell, the sheer increase in numbers meant that the total wage bill remained high. With its protected industrial structure and bloated public sector, the Kenyan economy was not unlike many others in the region.”

During the 1980s, Kenya complied with World Bank and IMF conditions by devaluing its currency, lowering tariffs, and ending government control of most non-food commodities. A major sticking point was the National Cereals and Produce Board, which the World Bank wanted out of the way so that the free market could determine grain prices. Kenya was willing to make such a promise to get a loan, but far less willing to make good on that promise. The World Bank griped that state-owned corporations “continued to be unofficially protected by their monopoly position, higher tariffs, and/or prohibitions on competing imports and ad hoc duty exemptions on raw materials” and called for clearer property rights and better enforcement of laws governing competition.

At the end of the decade, the government no longer controlled fertilizer prices and it withdrew from its previous role in marketing a few minor crops. The National Cereals and Produce Board “continued to be a major drain on the budget” and the government still controlled the retail prices of food commodities. As a percent of government expenditures, spending on wages and salaries and economic and social services declined, but at the same time, spending on repaying and servicing debts as a share of total spending went up.

Structural Adjustment in the 1990s

Beginning in mid-1993, the Kenyan government became more active in pursuing structural adjustment. By 1996, it had:

"It has eliminated exchange controls including restrictions on inward portfolio investments and removed all trade restrictions, except for a short list of a few products controlled for health, security and environmental reasons. The number of non-zero tariff rates has been reduced from seven to five, and the maximum tariff reduced from 62 percent in 1993/94 to 40 percent in 1995/96. With the liberalisation of the maize market in December 1993 and the petroleum market in October 1994, all price controls have been abolished. Steps were also taken to strengthen the financial system, including enhanced prudential supervision of commercial banks, the closure of financially unsound banks, and strict enforcement of statutory requirements of nonbank financial institutions (NBFIs), some of which were either transformed into banks or merged with existing banks. Firm actions were also taken to deal with the hitherto widespread mismanagement and corruption in the financial system involving access to credit from the Central Bank and budgetary resources.

"The Government has since 1992 been implementing a major civil service reform programme aimed at reducing the overall size of the civil service and achieving cost containment, and rendering the civil service more efficient by improving working conditions. To this end, the civil service has been trimmed by over 33,000 since July 1993.

"Privatisation of 211 non-strategic public enterprises has started, with the Government divesting its holdings in over 100 firms (including 43 tea factories in which it turned over the bulk of its shareholdings to farmers) by the end of 1995. In addition, it has reduced its holdings in another six enterprises, including Kenya Airways, Kenya Commercial Bank and the National Bank of Kenya. The Government is also making progress in parastatal reform. Initial steps to restructure key public enterprises like the Kenya Ports Authority (KPA), Kenya Railways (KR), Kenya Power and Lighting Company (KPLC) and Kenya Posts and Telecommunications Corporation (KPTC), have begun. However, further steps will need to be taken in order to accelerate progress in this area and thereby improve on the low investment efficiency that limits economic growth."

Structural Adjustment Loans to Kenya

Kenya received structural adjustment (SACs) and sectoral adjustment loans (SECALs) as follows:

• 1980: SAC ($55 million)
• 1983: SAC II ($130.9 million)
• 1986: SECAL (Agriculture) ($60 million)
• 1988: SECAL (Industry) ($165.7 million)
• 1989: SECAL (Finance) ($231.3 million)
• 1991: SECAL (Export Dev.) ($149.1 million)
• 1991: SECAL (Agriculture II) ($75 million)
• 1992: SECAL (Education) ($100 million
• 1996: SAC I ($126.8 million)

Resources and articles

Related Sourcewatch articles

• World Bank
• International Monetary Fund
• Washington Consensus
• Structural Adjustment Loan (SAL)
• Structural Adjustment Facility (SAF)
• Enhanced Structural Adjustment Facility (ESAF)
• Poverty Reduction and Growth Facility (PRGF)

External Resources

• Kenya: Economic Reforms for 1996-1998: The Policy Framework Paper, Prepared by the Government of Kenya in collaboration with the IMF and the World Bank, February 16, 1996.
• Gibbon, P., Y. Bangura and A. Ofstad (eds) (1992), 'Authoritarianism, Democracy and Adjustment. The Politics of Economic Reform in Africa', Scandinavian Institute of African Studies, Uppsala, jointly with UNRISD and Chr. Michelsen Institute.
• Peter Gibbon, Kjell J. Havnevik, Kenneth Hermele, A Blighted Harvest: The World Bank and African Agriculture in the 1980s, James Currey, London, 1993.
• Peter Gibbon (ed.), Social Change and Economic Reform in Africa, Scandinavian Institute of African Studies, Uppsala, 1993.
• Gibbon, P. (ed.), Markets, Civil Society and Democracy in Kenya, Scandinavian Institute of African Studies, Uppsala, 1995.
• Adebayo Olukoshi, (ed.), 'The Politics of Opposition in Contemporary Africa', Nordic Africa Institute, Uppsala, 19998.
• Mosley, P ., Harrigan J. and J. Toye, 1991, Aid and Power: The World Bank and Policy Based Lending, 2 vols., London: Routledge.

External Articles

• Geoffrey Gertz, "Kenya’s Trade Liberalization of the 1980s and 1990s: Policies, Impacts, and Implications," Carnegie Endowment.

2000s:

• Joseph Kipkemboi Rono, "The impact of the structural adjustment programmes on Kenyan society," Journal of Social Development in Africa, Vol 17 No 1 January 2002.
• David Dollar; Jakob Svensson, "What Explains the Success or Failure of Structural Adjustment Programmes?," The Economic Journal, Vol. 110, No. 466. (Oct., 2000), pp. 894-917.

1990s:

• Peter Gibbon, "A Failed Agenda? African Agriculture under Structural Adjustment, With Special Reference to Kenya and Ghana," Journal of Peasant Studies, Vol. 20, No. 1, 1992, p. 50-96, DOI: 10.1080/03066159208438501.
• Peter Gibbon, "The World Bank and the New Politics of Aid," European Journal of Development Research, 1993, Volume: 5, Issue: 1, Pages: 35-62.
• Grace Atieno Ongile, "Gender and Agricultural Supply Response to Structural Adjustment Programmes: A Case Study of Smallholder Tea Producers in Kericho, Kenya," Nordic Africa Institute Research Report No. 109, 1999.

1980s:

• Gurushri Swamy, "Structural adjustment in the 1980s : Kenya"
• Robert I. Rotberg, "Kenya's political and economic crisis," Christian Science Monitor, November 28, 1984.
• Glenn Frankel, "Food Crisis Threatens Fragile Kenyan Economy," The Washington Post, August 9, 1984.
• Mosley, P., 1986, "The Politics of Economic Liberalization: USAID and the World Bank in Kenya, 1980-84," African Affairs, Vol.85, No.338.
• Mosley, P ., 1986, "Agricultural Performance in Kenya since 1970: Has the World Bank got it Right?," Development and Change,Vol.17, pp.513-50.
• Blaine Harden, "Africa's Poor on Brink; Nations in Severe Debt Crisis," The Washington Post, June 7, 1987.
• Samantha Sparks, "Finance: IMF Approves Loans Totalling $239 Million to Kenya," IPS-Inter Press Service, February 2, 1988.
• Kristin Helmore, "Donors debate as debtors wait," Christian Science Monitor, June 17, 1988.
• Horace Awori, "Kenya: Experts Debate Value of Structural Adjustment Programs,"IPS-Inter Press Service, October 4, 1988.
• Blaine Harden, "As Economic Woes Worsen, Some Say Africa Must Share Blame," The Washington Post, October 8, 1988.
• Horace Awori, "Kenya: To Benefit From IMF Supplementary Financing," IPS-Inter Press Service, October 20, 1988.
• "African Debtor Nations Seek Alternative to IMF Programs," Journal of Commerce, February 17, 1989.
• Mosley, P. and L. Smith, 1989, "Structural Adjustment and Agricultural Performance in Sub-Saharan Africa," Journal of International Development, Vol.1, No.3.