Features: Is the IMF obstructing Kenya’s devolution process?

Published on Pambazuka News, by Charles Abugre, August 18, 2011.

If a government based on devolution and the dispersal of power is to be given a chance, the IMF’s role in political horse-trading in Kenya should be curtailed, argues Charles Abugre … //

… HOW THE IMF INTERVENED:

In early September 2010, barely a month after Kenyans brought their new Constitution into law following a successful referendum, an IMF mission came to town to begin preliminary discussions towards extending a credit facility to Kenya. Among others, the mission broached the idea of a single PFM Act. A follow-up mission took place in November to prepare the Government of Kenya (GoK) to present a loan request to the IMF Board. 

The Letter of Intent drafted by this mission, signed by the Minister for Finance and the Governor of the Central Bank to the IMF executive director committed the GoK to present a single PFM Bill to parliament. This mission also proposed technical assistance to the Ministry of Finance to enable them prepare this bill. In January 2011, two parallel missions were in town, one to finalise the loan deal and the other a technical team to appraise and recommend a framework for Public Finance Management. The final letter of intent signed by the Minister for Finance and the Central Bank Governor and addressed to Dominique Strauss Kahn, the then Managing Director of the IMF undertook, as part of their core conditions to deliver an Integrated PFM to parliament by end August and to adopt a single Treasury account. These conditions will be reviewed in September as part of other conditionalities that the Government of Kenya committed itself to. You can find these in the Kenya section of the IMF website.

The mission that provided technical assistance for the development of the Integrated PFM Bill submitted its report in March entitled ‘Kenya: Developing an Integrated Legal Framework for Public Financial Management’. The mission met a range of actors except the Devolution Taskforce. Subsequently the IMF provided technical assistance for a drafting group to transform the mission report into a Bill. The draft Bill that Treasury presented to the CIC is the product of these processes.

WHAT THE TECHNICAL ASSISTANCE MISSION RECOMMENDED:

The report of the mission was extensive and detailed. It outlined the key sections of an integrated PFM bill, what an integrated budget calendar should be; suggested what the legal framework of the County Government (what they called a sub-national government) should be; and made extensive and detailed recommendations that range from their interpretations of the powers given to the Treasury by the Constitution and many more.

This report leaves no one in doubt that the intention of the mission, and of the IMF, was (and is) to ensure that the powers of the Treasury are as enhanced as possible; that the flexibilities of the county government are as constrained as possible when it comes to the management of public finance and that the management of public finance is as centralised as is possible. The mission made very selective choice of principles of public finance outlined in the constitution, emphasising and amplifying those that are in consonance with the IMF’s beliefs and the mission’s biases and keeping mute or only mentioning in passing those principles they don’t quite like. A few of the mission’s biases and errors are worth mentioning.

THE ROLE OF THE MINISTRY OF LOCAL GOVERNMENT IN DEVOLUTION: In the mission’s view local government ministry’s role is political and administrative aspects of devolution. With this characterisation, Devolution Taskforce was effectively boxed – it had no role in financial devolution.

ROLLING – BACK AND AMPLIFYING PERCEIVED POWER LOST BY THE TREASURY: In virtually every aspect of public finance management the mission report seeks to curtail powers given by the constitution to other parts of government. In relation to Parliament’s role in budget making, it recommends ‘regulating changes that parliament can make to national budget’. For the counties it recommends ‘defining budget documents to be presented to the County assemblies, who should present , and changes that county assemblies can make’. It also recommends that a county single account should be ‘prescribed by Treasury’ (national government). On borrowing it recommends that Treasury should ‘impose a golden rule on borrowing on the County’ and that authority to ‘grant guarantees on County borrowing should vested in the Treasury’. It proposes that Treasury should have oversight power over all accounting, auditing and procurement functions ‘within every county treasury’. They prefer that all accounting and auditing staff be employed by the Treasury. They recommend that Treasury (national government) be vested with the power to ‘collect, consolidate, disperse and publish county level financial and non-financial performance information’… It recommends that the PFM Act ‘elaborate on the significant powers given to the Treasury to oversee the PFM system.’ There are loads and loads of these types of recommendations.

The mindset behind these types of recommendations is one of centralisation and central CONTROL. This in my view fundamentally undermines the spirit and letter of the constitution, the expectation by the millions of Kenyans who have suffered the consequences of centralised power that at long last power will be decentralised.

Selective amplification of financial management principles. The principles that the IMF report and which are reflected strongly in the draft Integrated Finance Management Bill choose to project are transparency, stability, fiscal responsibility and accountability. Missing across the document are those principles that make the Kenyan constitution stand out as unique, including the principle that PFM should be judged by its impact on wellbeing and equitable; the principle that the public have the right to know and to participate at all levels of public finance management; the principle that the management of public finance should be devolved and participatory. Wherever ever one of these is mentioned it is claimed that they are general rather than specific principles. This is nonsense of course as any principle can be quantified only to some extent and the level of that extent depends on the effort one puts into quantifying it. The purpose is clear, to project those principles which sit well with the IMF and jettison those that do not conform with centralised management ethos and cohere with narrow purpose for public finance management.

A fundamental misreading or deliberate undermining of the Constitution? In my view, the IMF has fundamentally misread the 2010 Constitution of Kenya in several respects. First, the term ‘sub-national government’ tends to refer a level of government that in terms of hierarchy is subservient to a higher hierarchy. The Kenyan constitution in my view is clear that there the sovereign power of the people is exercised at 2 levels of government – national and county (Article 1 (4) and that the government at these 2 levels are “distinct and inter-dependent and shall conduct their mutual relations on the basis of consultation and cooperation”(Article 6(2)). The mindset behind the draft Integrated PFM Bill is one that subjugates the County to the National. This is plainly unacceptable.

The principals may well want to avoid violating an IMF conditionality by suggesting an Integrated Bill. If so, this Bill will be a considerably voluminous one indeed and will take very tricky drafting in order to preserve the distinct powers of the County, spell out how the 2 levels will cooperate an collaborate without one subsuming the other and how the desire of the people for participatory, devolve, transparent and accountable government working solely to improve services and the quality of lives of the people, a Constitution they fought so hard to bring about, will be preserved.

But of course I recognise the IMFR’s need to ensure prudent management of public finance in order to preserve the monetary system, stable prices and exchange rates. Could this could be achieved without undermining the most ground-breaking constitution on the African continent? It will be a tragedy if the principals were to reach a consensus which unknowingly rolls back what the people fought for – devolved and accountable power.

KENYA’S OBLIGATIONS TO THE IMF: … (full long text).

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