Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events


Banking crises (1985-1989): 4 banks and 24 non-bank financial institutions faced liquidity and solvency problems together accounting for 15% of total liabilities of financial system. Causes: ToT shock and drought, relaxation of licensing requirements resulted in rapid growth of financial institutions; poorly managed new non-bank financial institutions without sufficient capital base, political motivated loans, and lack of qualified staff and inadequate information leading to inadequate supervision. Overall change in macro policies: government embarked on major stabilization and adjustment program in late 1986 to correct renewed macro-imbalances resulting from loss of fiscal discipline and adverse external developments. However, during the early 1990s , increases in public sector employment pushed up budget deficit and monetary expansion fueled inflation. Moreover, with declining terms of trade and slow growth in non-traditional exports, the current account deficit remained high.a2


Commercial banks were allowed to grant overdraft and other facilities to non-resident-owned companies up to amounts needed to pay for duties on imported capital equipment.a3(first entry)


Capital gains of foreign investors were allowed to be invested in government securities instead of in lower specified rates of interest.a3


The Foreign Investment Protection Act was amended to define the value of foreign investment that can be repatriated in terms of the foreign currency of the original investment instead of in terms of Kenya currency.a3


The introduction of the Insider Trading Laws.a4


Ceilings on interest rates were removed. Mehrez and Kaufmann Liberalization date. a1


Intervention into two local banks. a2


Banking crises (1993-95): serious systemic problem with banks accounting for more than 30% of assets of the financial system facing solvency problems.a2


Borrowing by foreign-controlled companies on the domestic market was fully liberalized.a3


Offshore borrowings by residents were allowed without limit, provided that (1) interest does not exceed LIBOR plus 2%, and (2) such borrowing is not guaranteed by the Government.a3


Restrictions on investment by foreigners in shares and government securities were removed. The Capital Market Authority Act was amended to allow foreign equity participation of up to 40% of share capital of listed companies, while individuals are allowed to own up to 5% of shares of companies listed in the stock exchange.a3


Borrowing by foreign-controlled companies on the domestic market was fully liberalized. Offshore borrowing by residents was allowed without limit subject to: (1) interest does not exceed LIBOR plus 2%, and (2) such borrowing is not guaranteed by the Government. Applications for borrowing on other terms must be referred to the Central Bank of Kenya.a3


Details of outward investment transactions in amounts of the equivalent of $500,000 and above were required to be reported to the CBK for statistical purposes.a3


President Daniel Arap Moi was reelected. Ethnic killings claimed more than 85 lives in a two-week period.


Finance Minister Simeon Nyachae announced a new deficit-fighting budget.


Terrorists bombed the U.S. Embassy in Kenya, shattering many lives.


The NSE (Nairobi Stock Exchange) Index reached 3000 level for the first time since June 3, 1998.


Finance Minister Simeon Nyacahe resigned.


In the second quarter, the government drafted rules to move the NSE to a delivery-versus-payment system with a T+5 settlement timeframe. The Capital Markets Authority finalized its new disclosure requirements. The East African Member States Securities Regulatory Authority (EASRA) approved minimum requirements for cross-border listings between East Africa's three stock exchanges.


President Daniel Arap Moi announced a cabinet reshuffle in which he cut the members of ministries from 27 to 15, but he maintained all of his current ministers with some simply sharing ministry locations.


The high court of Kenya forced East African Breweries to pay one of its member distributors more than 240 million shillings in compensation.


Interest rates on 91-day Treasury bills crossed the 20% mark for the first time.


The Kenyan shilling appreciated against the U.S. dollar but depreciated again in March.


Serious drought led to massive power rationing since Kenya relied on hydroelectricity generated from dams for 70% of its power supply. The 2000 African Competitiveness Report by the World Economic Forum ranked Kenya at number 22 out of 24 African states.


Kenya's inflation rate jumped to 6.0% and the shilling shed 2.7% of its value.


In the third quarter, GDP grew only at 0.9% year-on-year due to persistent drought conditions.


The IMF approved a credit of about US$198 million to support Kenya's poverty reduction and growth facility (PRGF) program, unlocking a series of funds from other multilateral organizations, including the World Bank and the African Development Bank. The current account balance improved from US$417 million deficit to US$27 million surplus.


Kenya successfully rescheduled debt payments to Paris Club creditors. But Henya ranked 82 out of 90 nations on corruption in an international report.


Kenya was hit by high oil prices.


In the first quarter, the political arena remained unstable.


The World Bank stalled the disbursement of US$25 million out of a US$72 million credit line opened for financing Kenya's energy purchases. The Nairobi Stock Exchange dropped to a seven-and-a-half-year low on poor corporate results and a gloomy macroeconomic outlook.


The government failed to pass a key anticorruption bill. The controversial Donde Bill restricted the interest banks charge on their loans and increases the rates they pay on their deposits.


Moi appoints Kenyatta's son Uhuru to parliament and to a cabinet post in November, apparently to rejuvenate the Kanu leadership before the 2003 election.


Ethnic tensions culminate in several violent clashes. In December thousands flee and several people are killed in rent battles involving Nubian and Luo communities in Nairobi's Kibera slum district.


After months of legal wrangling at the regional COMESA Court of Justice, the government has emerged triumphant in a landmark case involving a locally-based company that was seeking US$1bn in damages and loss of earnings from the state relating to 'illegal' land re-allocation by the government


The Kenyan parliament has finally passed key legislation aimed at tackling corruption, proposing the setting up of the Kenya Corruption Control Authority (KCCA) and the Kenya Corruption Control Advisory Board (KCCAB).


The Minister for Trade and Industry Nicholas Biwott announced that a committee had been established tasked with aligning the country's industrial tariffs with the requirements of the World Trade Organization (WTO).


Some 200 Masai and Samburu tribe people accept more than $7m in compensation from the British Ministry of Defense. The tribespeople had been bereaved or maimed by British Army explosives left on their land over the last 50 years.


President Daniel arap Moi named Transport and Communications Minister Musalia Mudavadi as his vice-president to replace George Saitoti


Ten Kenyans, three Israelis are killed when an Israeli-owned hotel near Mombasa is blown up by a car bomb. A simultaneous rocket attack on an Israeli airliner fails. A statement - purportedly from al-Qaeda - claims responsibility.b6


Opposition presidential candidate Mwai Kibaki wins a landslide victory over Kanu rival Uhuru Kenyatta, ending Daniel arap Moi's 24-year rule and Kanu's four decades in power.


Government bill proposes anti-corruption commission. Moi critic John Githongo appointed anti-graft czar. b6


Representatives from the Kenyan and South Korean chambers of commerce signed a bilateral agreement, which should boost trade between the two countries.


President Mwai Kibaki yesterday ordered a new probe to investigate the country's biggest ever fraud case - the so-called Goldenberg scandal - which dates back more than a decade


President Mwai Kibaki announced an 11% increase in the statutory minimum wage, taking the monthly minimum wage from Ksh3,587 (US$48) to Ksh3,982 (US$53),


The government has published a bill that will establish a mandatory national social health insurance scheme as early as next year.


The World Bank has approved a US$110m credit to Kenya to support the development of rural infrastructure and education.


The Kenyan government ruled out privatization of the water provision, instead pushing forward the idea of forming joint ventures with the private sector to run the utility at a local level.


Vice President Michael Wamalwa dies.


Kenyan President Mwai Kibaki yesterday named veteran politician Moody Awori as the country's new vice president.


The government announced this week that it would not be renewing the work permits for 16,000 expatriate workers, who are mainly deployed in middle-level management jobs, when their contracts ends, in order to create more opportunities for local Kenyans.


International Monetary Fund (IMF) resumes lending after three-year gap, citing anti-corruption measures.


Kenyan president Mwai Kibaki announced a KSH706bn (US$9.23bn) investment plan to address the country's sluggish growth


Kenya newly created National Economic and Social Council (NESC), a joint public-private sector initiative, to attract FDI.


Government decides to grant former president Daniel arap Moi immunity from prosecution on corruption charges.


the World Bank has now confirmed that it will release the second US$50m tranche under its US$150m economic and public sector-reform credit to Kenya


The Kenyan government has published a draft investment bill as the East African country steps up its effort to woo foreign investors who it believes will help to kick start the country's still struggling economy


The government unveiled a new set of bank notes yesterday, as it takes another symbolic step to erase the sorry legacy of retired President Daniel arap Moi.


Long-awaited draft of new constitution completed. Document - which requires parliamentary approval - proposes curbing president's powers and creating post of prime minister. b6


Kenya's Finance Minister announced that the government is aiming to sell off part of its 35% stake in the Kenya Commercial Bank (KCB) in order to improve public finances.


Deadline for enactment of new constitution missed. President Kibaki blames failure to agree on key issues. Head of body tasked with drawing up new constitution resigns.


One person has been shot dead and scores more injured in the western city of Kisumu, as the latest anti-government rally organized to protest against the continued delay in adopting the country's draft constitution turned violent.


Regulations on Foreign Investors


Restrictions: Foreigner investors have been allowed on the NSE since Jan. 1995. Any individual foreign investor is allowed to hold a maximum of 5% of the total capital issued by a Kenyan-controlled firm on the NSE and combined foreign ownership will be limited to a maximum of 40% of such stock. Foreign investors are not allowed to buy stock in a company controlled abroad, unless such stock was bought from another already existing overseas stockholder or was in a new share issue.

Taxation: 10% dividend tax. No capital-gains tax. a7


Restrictions: government approval is required for the sale or issue of capital and money market instruments, derivatives, and purchase of real estate by non-residents.

Taxation: No change.


Restrictions: 1. Power, posts, telecommunications, ports and the media are restricted to foreign investors. 2. Foreign investors are free to convert and repatriate profits including retained profits which have not been capitalized. 3. Foreign insurance companies to have at least 33 percent local ownership. 4. Foreign brokerage and fund management firms are allowed to participate in the local capital market only through locally registered companies. Such locally registered firms must have local ownership of at least 51% in case of brokerage firms, 30% for fund management firms.

Taxation: Branches of non-resident companies pay tax at the rate of 37.5%. 5% dividend tax rate. VAT tax rate reduced from 18% to 16%.