Identifier
Created
Classification
Origin
06NAIROBI1015
2006-03-07 10:31:00
CONFIDENTIAL
Embassy Nairobi
Cable title:  

AMBASSADOR MEETS KENYA'S NEW FINANCE MINISTER

Tags:  ECON EFIN EAID PGOV PREL PINR PTER KE 
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VZCZCXRO0767
RR RUEHLMC
DE RUEHNR #1015/01 0661031
ZNY CCCCC ZZH
R 071031Z MAR 06
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 0088
INFO RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEATRS/DEPT OF TREASURY WASHDC
RUEHXR/RWANDA COLLECTIVE
C O N F I D E N T I A L SECTION 01 OF 03 NAIROBI 001015 

SIPDIS

SIPDIS

DEPT FOR AF/E, AF/EPS, EB/IFD/OMA
USAID FOR AFR/DP WADE WARREN, AFR/EA JEFF BORNS AND
JULIA ESCALONA
MCC FOR KEVIN SABA AND MALIK CHAKA
TREASURY FOR LUKAS KOHLER
LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 2/14/2031
TAGS: ECON EFIN EAID PGOV PREL PINR PTER KE
SUBJECT: AMBASSADOR MEETS KENYA'S NEW FINANCE MINISTER

Ref: A. Nairobi 973, B. Nairobi 494

Classified by Econ Counselor John Hoover for reasons 1.4
(B) and (D).

C O N F I D E N T I A L SECTION 01 OF 03 NAIROBI 001015

SIPDIS

SIPDIS

DEPT FOR AF/E, AF/EPS, EB/IFD/OMA
USAID FOR AFR/DP WADE WARREN, AFR/EA JEFF BORNS AND
JULIA ESCALONA
MCC FOR KEVIN SABA AND MALIK CHAKA
TREASURY FOR LUKAS KOHLER
LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 2/14/2031
TAGS: ECON EFIN EAID PGOV PREL PINR PTER KE
SUBJECT: AMBASSADOR MEETS KENYA'S NEW FINANCE MINISTER

Ref: A. Nairobi 973, B. Nairobi 494

Classified by Econ Counselor John Hoover for reasons 1.4
(B) and (D).


1. (C) Summary: In his new job as Kenya's Finance Minister,
Amos Kimunya wants to focus on repairing relations with
donors, improving governance, and controlling government
spending. Kimunya also told the Ambassador on March 3 that
the Government of Kenya is moving ahead with major
privatizations and procurement reforms, and will be tabling
a long-awaited anti-money laundering bill in Parliament in
April. Kimunya made a plea for greater help in building
capacity at key institutions of governance such as the
Attorney General's Office. The Ambassador expressed a
shared desire for better GOK-donor relations, but noted
that increases in assistance in key areas of governance can
only succeed when Kenya's leadership summons the political
will to take concrete action to address corruption
allegations and ongoing political impediments to reform.
End summary.


2. (SBU) The Ambassador paid a courtesy call March 3 on
Amos Kimunya, Kenya's newly-appointed Minister of Finance.
Kimunya moved over to Treasury from the Ministry of Lands
on February 14 following the February 1 resignation of the
former Finance Minister, David Mwiraria, in the wake of
corruption revelations implicating Mwiraria in the Anglo-
Leasing and similar scams (ref B). Kimunya was joined by
Assistant Minister of Finance Peter Kenneth and staff from
the Ministries of Finance and Foreign Affairs. The
Ambassador was accompanied by the USAID Kenya Mission
Director and Econ Counselor.

Priorities: Donor Relations, Governance, Budget
-------------- --



3. (SBU) Echoing public comments made earlier when he
assumed his new position, Kimunya laid out three areas of
priority attention during his tenure at Kenya's Treasury.
First, he will work to restore confidence and good
relations with the donor community. In this regard, he
urged that donors work with the GOK privately and not
engage in "dialogue through the media." Second, he
acknowledged that Treasury "is in the spotlight" with
regard to corruption problems, and that it is his intention
to make the Ministry more central to better governance and
integrity throughout the GOK as a way to make sure citizens
are getting better value for their money. Noting that the
GOK is facing an unexpected $400 million outlay for drought
relief, the Minister said his third priority is cost
containment in the budget. Revenues, he noted, have been
rising sharply, but will soon level off. His intention
therefore is to control costs to the extent possible, and
where money can be saved, redirect it to social programs.

Privatization and Economic Reform
--------------


4. (SBU) In response to a question from the Ambassador,
Kimunya argued that Kenya is moving ahead quickly on
privatization and other needed economic reforms. He noted
that the GOK is moving forward with plans beginning in
March to privatize 30% of KenGen, the country's power
generator. Further, the Cabinet approved the previous week
a long-awaited plan to restructure the country's monopoly
landline phone company (septel) in preparation for selling
it both to the public and a strategic investor. The GOK is
also moving to reform the financial sector, and is putting
together divestiture plans to reduce or eliminate
government shareholding in large banks. It was crucial, he
said, that all such plans be carried out transparently to
avoid past cases of privatization in which valuable assets
were "sold for a song" through crooked deals made by
corrupt insiders. In this regard, he said, the GOK was
moving to establish the Privatization Commission under the
new privatization legislation passed in 2005. Also crucial
in terms of improved economic governance, said Kimunya,
will be implementing the new Procurement Act, also passed
in 2005. The implementing regulations for the new law have
been drafted and the GOK has put them out for public
comment.

Anti-Money Laundering Bill Is Coming

NAIROBI 00001015 002 OF 003


--------------


5. (SBU) The Ambassador also noted the importance of anti-
money laundering (AML) legislation in the fight against
graft, drug trafficking, and terrorist financing. Kimunya
said the bill has not fallen off the GOK's radar screen.
The GOK will finish final edits to the draft AML bill by
the end of March, and then submit it as a priority to
Parliament in April. (Note: The next session of Parliament
is scheduled to begin on March 21. End note).

Governance and GFATM
--------------


6. (SBU) The Ambassador noted that the U.S. is by the far
the largest contributor to the prevention and treatment of
HIV/AIDS in Kenya, and raised our concerns about Kenya's
poor track record in attracting funding from the Global
Fund for AIDS, Tuberculosis and Malaria (GFATM). This, he
pointed out, is largely because of institutional
bottlenecks in the Kenya Ministry of Health. Procurement
under GFATM, the Ambassador suggested, needs to be moved
away from the Ministry to a more competent entity, such as
UNICEF. He and the USAID Mission Director urged Kimunya
and the Finance Ministry to play a greater role in
resolving this issue as a way to ensure that Kenya procures
and receives needed HIV/AIDS medicines on a timely basis.

Millennium Challenge Account and Governance
--------------


7. (SBU) Kimunya agreed on the need to "remove
impediments" in the procurement of needed drugs, and used
the topic to inquire about the status of Kenya's proposal
for Millennium Challenge Corporation Threshold funding,
which focuses on procurement reforms in the health sector.
The Ambassador responded by saying the Threshold proposal
is in "pause mode" in light of the serious allegations made
public in January about high-level corruption and cover-up
in the Kibaki administration. The U.S., he said, needs to
see concrete actions that indicate the GOK is serious about
tackling corruption before moving forward on the Threshold
program.


8. (SBU) Kimunya argued that Kenya faced a "chicken or the
egg" dilemma with regard to the MCC Threshold proposal, as
well as other assistance programs in support of improved
governance. Kenya needs investment in governance if the
latter is to improve, he argued, but donors don't want to
provide assistance until there is improvement first. He
cited the example of the Attorney General's Office, which
he said simply lacks the capacity to keep up with
corruption prosecutions based on investigations carried out
by the better-staffed Kenya Anti-Corruption Commission.


9. (C) The Ambassador agreed with Kimunya, and said the
U.S. will continue to support through our USAID Mission
building capacity in governance. But he pointed out that
the U.S. and others are frustrated by the lack of progress
in many key governance-related areas, including support to
Kenya's Department of Public Prosecutions under the
Attorney General. Institutional bottlenecks, such as the
continued lack of coordination between Kenyan police and
prosecutors for example, have led to back sliding, and not
progress, despite ample assistance from the U.S. and
others. While the U.S. does not expect miracles in the
prosecution of corruption cases, the Ambassador said that
donor assistance will only be effective if the GOK chooses
to exercise political will and takes concrete action to
remove such impediments.

Comment
--------------


10. (C) Kimunya is an interesting character. He is not
linked to any of the several ongoing corruption scandals,
and as a former CPA appears technically competent to assume
his new job (see biodata below). That said, in his current
role, he is perceived as more a politician and a NARC
apologist than a reformer. Despite saying almost all the
right things in his meeting with the Ambassador, his
commitment to economic reform and fighting corruption
appear less-than-full. Negative clues include his awkward
defense of the ministers implicated in January by the

NAIROBI 00001015 003 OF 003


Githongo revelations. On economic reform, we know from
other sources that he only very grudgingly conceded to
going along with the telecom reform plan approved at last
week's cabinet meeting. But we should give Kimunya the
benefit of the doubt for now. While we share his desire to
improve GOK-donor relations, we fear he faces an uphill
battle given decisions and events which may be beyond his
control, such as the still-incomplete GOK response to the
Githongo dossier, and the furor caused by last week's
police raid of a leading daily newspaper (ref A).

Biodata
--------------


11. (SBU) Amos Kimunya is 44 years old and ethnic Kikuyu.
He is an accountant by background and a current Director of
the Kenya College of Accountancy. He has worked for several
accounting firms, including Neville Russell Chartered
Accountants in the United Kingdom. Kimunya holds a
Bachelor of Commerce degree from the University of Nairobi
and became a Certified Public Accountant (Kenya) in 1997.
He is a past Chairman of the Institute of Chartered Public
Accountants of Kenya.

Kimunya served in government as a member of the Kenya Anti-
Corruption Authority Advisory Board in the late 1990s, and
continued in a similar role on the Anti-Corruption Police
Unit Advisory Committee after the ill-fated KACA was
declared illegal by the Supreme Court.

Kimunya ventured into politics for the first time in 2002
on the NARC ticket. He won the Kipipiri parliamentary seat
and was appointed to the Cabinet in January 2003 as
Minister of Lands. He has remained a diehard supporter of
President Kibaki during his tenure in office.
Bellamy