Day Musalia got World Bank dressing down

Friday, December 6th, 2019 00:00 |
Musalia Mudavadi at State House Nairobi when he was sworn in as Deputy Prime Minister in 2008. Photo/PD/FILE

Emeka-Mayaka Gekara

Amani National Congress (ANC) leader Musalia Mudavadi was given a dressing down in Washington during a meeting with donors while he served as Finance minister.

The economy was bleeding and Bretton Woods organisations World Bank and International Monetary Fund (IMF) had turned their backs on President Daniel arap Moi insisting he had to carry out specified economic and political reforms for the country to access cash. Moi had resisted the donors’ demands. Mudavadi says he was a Finance minister without finance.

  “I came to realise that our county had no access to foreign aid. The country had no access to foreign aid. I felt poor, a beggar for my country. The owners of global finance had turned off the taps,” he reveals in his yet-to-be-released autobiography.

 It is against this backdrop that Mudavadi led a team comprising his then permanent secretary Wilfred Koinange and Central Bank governor Eric Kotut to Washington on a begging mission.

The delegation secured an appointment with Edward Jaycox, vice president of the World Bank. Then hell broke loose.

“I cannot discuss with looters. I don’t want to talk to people who have ruined their own economy, now coming here thinking that we can give them more money to go and loot,” Mudavadi quotes Jaycox telling them.

“Some of these characters you have brought here should be nowhere near the CBK. Others have messed up your parastatals. Your country is simply rotten,” said the World Bank chief.

“He said the Central Bank of Kenya (CBK) was rotten. Our reserves with IMF were depleted. Unless there was a shake-up at the CBK, Kenya was going nowhere.” 

They came back empty handed but Mudavadi had another challenge - how to convey the message to President Moi. 

“When I came back and because of the things they had said about people who were close to the president. I agonised about how to break the news to him. But I had no choice. I delicately told him everything,” he writes.

Mudavadi also had run-ins with the IMF country boss Peter Heller.  He describes Heller as one of the most difficult people to deal with.  He was the man behind the Structural Adjustment Programmes (SAPs) that Moi detested.

They include removal of exchange controls, changes in the agricultural sector including opening the economy to market forces, changes to the banking sector, removal of import licences and privatisation of State entities. 

Mudavadi says  during Heller’s period, Treasury officials had kept him in the dark about the country’s financial state. Heller left and was replaced by Hiroyuki Hino. This is when data presented to him revealed that the country was bankrupt.  

“Through Hino I began to see how the CBK was looted. I began to see numbers people at Treasury would not have wanted me to see.”

“The CBK had lost control of the banking sector. Several banks were in distress because of illegal lending through the dubious Export Compensation Scheme. The Goldenberg scandal was hatched and executed between 1991 and 1993 and was marketed as possible major exchange earner for the country.”

In the scheme, Goldenberg International, a company owned by Pattni and former spy chief James Kanyotu would export the minerals and receive compensation from the government for earning foreign exchange. It turned out Goldenberg International was not exporting any gold and diamond jewellery and that their claims were fictitious.

The scheme was executed in conjunction with Exchange Bank Ltd, also owned by Pattni and Kanyotu. The IMF wanted the scheme audited and demanded action on CBK top dogs.  Kotut was swiftly shown the door and replaced with Micah Cheresem. 

Both Koinange and Kotut were charged in court over the Goldberg scandal that led to the loss of Sh5.8 billion. Kotut was cleared of any wrongdoing in the scandal.

But in a controversial ruling, the High Court in 2008 cleared him of conspiracy to steal and abuse of office charges.

The ruling was made by Justices Joseph Nyamu, Roselyn Wendoh and George Dulu.

He had been charged alongside Pattni, Koinange and former CBK Deputy Governor Eliphaz Riungu.  

They were accused of conspiring to steal Sh5.8 billion from the Paymaster General’s account at CBK on diverse dates between April and July 1993. He also faced abuse of office charges alongside Koinange, Riungu and former Kenya Commercial Bank General Manager Elijah arap Bii. 

The judges terminated the two cases on the grounds they had been filed against him based on a flawed Commission of Inquiry report on the Goldenberg scandal.

The court prohibited the Attorney General from instituting fresh criminal cases against Kotut or filing other charges based on the report. Koinange died in September 2012.

More on National