Nipate
Forum => Kenya Discussion => Topic started by: Globalcitizen12 on December 03, 2015, 12:43:03 PM
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Listening to BBC and it is featuring Ghana economic problems. It looks like Ghana cannot even afford power for 24 hours. Manufacturing sector down 2% because of lack of power. Ghana currency has depreciated fast than fufu left out in Accra humidity. What caused this is drastic drop in commodity prices Cocoa, Gold, Gas and Oil. The lack of power has dropped Ghana GDP by 4%.
Mahama is calling on IMF to bail him out.
This what happens when a weak deputy president steals elections and takes on a job that the deputy cannot handle. Death of Atta Mills really messed Ghana economy and future
Professor Newman Kwadwo Kusi, Executive Director of the Institute for Fiscal Studies (IFS), says the economic arena in 2016 would be tough for government in light of the current fiscal and macroeconomic challenges persisting in the country.
Speaking at a 2016 Budget Forum on ‘Making The Most Out of Petroleum Revenues’ organised by the Natural Resource Governance Institute and the IFS, Prof. Kusi said the challenges facing the economy, such as depreciation of the cedi were likely to continue into 2016, posing challenges for the budget.
He said 2016 would be tough for government, especially as it would be an election year and government would have to increase expenditures in some areas while at the same time, the economy would not be growing.
Addressing the topic ‘Ghana: Fiscal Challenges and Risks: What should we expect in 2016”, Prof. Kusi noted that latest figures from the Bank of Ghana (BoG) showed that as at end of June 2015, Ghana’s public debt stock stood at GH˘ 94.5 billion, representing 70.9 percent of the Gross Domestic Product (GDP), out of which external debt totalled GH˘ 58.6 billion or 44 percent of GDP, while domestic debt totalled GH˘35.9 billion or 26.6 percent of GDP.
He said the debt levels were not sustainable, adding that although government was trying to address the anomaly by emphasizing longer term borrowing, it also came at a price.
Other challenges, he mentioned, included higher than expected inflation levels since 2013, which reached 17.3 percent in August 2015 and forced the BoG to revise its inflation target from 11.5 to 13.7 percent.
On the fiscal environment, Prof. Kusi said there was some improvement in the early part of the year driven by improved revenue mobilization due to an increase in both oil and non-oil revenues and expenditure containment.
“With total revenue and grants rising in the face of declining expenditure, the fiscal deficit, on cash basis, dropped to 2.2 percent of GDP against a target of 3.4 percent. The deficit was financed mainly from domestic sources and included in the domestic sources of funding, the deficit was a drawdown of GH?205.7 million from the Ghana Stabilisation Fund, attributed to shortfalls in oil revenue resulting from lower oil prices during the period,” he stated.
He said despite this impressed performance, government revised the budget, cutting both revenue and expenditure estimates and resulting in overall fiscal deficit of 7.3 percent of GDP. The weakening of the cedi against major trading currencies, coupled with increased trade balances, were all challenges that would have to be addressed.
Other risks facing the economy were the large informal sector of the economy, which was not well documented and taxed, huge infrastructure deficits including roads, utilities and water supply, power shortages, corruption and an underlying weak economy reflected in a narrow production base, over-dependence on few primary and unprocessed export commodities, weak manufacturing base and high import dependence.
Prof. Kusi said in order to mitigate the effects of these challenges and risks and ensure growth, there was the need to implement sound fiscal policies and build strong buffers and mechanisms to manage risk.
The 2016 budget, he said, would need to acknowledge the importance of the private sector in economic growth and transformation and provide support for it.
He also called for the institution of a well-grounded fiscal framework to anchor fiscal policy and address fiscal deficits.
“The challenge is whether or not government can demonstrate fiscal prudence in the run-up to the 2016 elections.”
Other expectations for the 2016 budget, he outlined, included significant investment in infrastructure to ensure transformation, strengthen export diversification to improve trade balance by rewarding domestic production and improved revenue domestic mobilization.
–GNA
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Will this happen to Kenya? Nah!!!
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It has happened ..
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When Ghana discovered oil, they went on a borrowing and spending binge. Spend spend spend spend. Even before they could get the oil out if the ground. Everything was pegged on oil price of $100 dollars per barrel. When oil price dropped and remained below $ 50.00 per barrel , shiet hit the fan. Lenders want their money. Govt has no source of income.
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Precisely. The bedrock of any economy is well diversified economy. Kenyan can withstand any shock thanks to that. Those that depend on one or two commodities..like Zambia, Nigeria, Ghana, Angola, Sudan...name them...are just one bad luck away from crisis.
When Ghana discovered oil, they went on a borrowing and spending binge. Spend spend spend spend. Even before they could get the oil out if the ground. Everything was pegged on oil price of $100 dollars per barrel. When oil price dropped and remained below $ 50.00 per barrel , shiet hit the fan. Lenders want their money. Govt has no source of income.
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Kenya has borrowed 500 billion to finance railway line that was supposed to be used to transport commodities out of EA. Our reccurent exipenditure is out of control
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We started paying for the railway long time ago...with about 25-40b annually ...collected from railway dev levy that every importer and exporter pays.. with our revised GDP, our debts are sustainable.
Kenya has borrowed 500 billion to finance railway line that was supposed to be used to transport commodities out of EA. Our reccurent exipenditure is out of control
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You are saying in 15 years time Kenya will have repaid the debt
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pretty much...find out how much we have collected from "railway development levy"...RDL..if we collect 1.5% of the import value...nearly 1.5-2 trillion...then this can be self-financing..without the need to chip in our taxes. RDL can easily collect 30-40B annually.....and that in 15 yrs....can repay the loan.It only fair that those who use the railway line to import and export stuff pay for it.....so we don't burden somebody in Mandera who care less about the railway.
You are saying in 15 years time Kenya will have repaid the debt
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We started paying for the railway long time ago...with about 25-40b annually ...collected from railway dev levy that every importer and exporter pays.. with our revised GDP, our debts are sustainable.
The Railway Development Levy came into existence in 2013 (Finance Act 2013, No. 38 of 2013). So there have been only 2 years of collection ... not what I would call "long time ago". Also, exporters do not pay; the act states that
The levy shall be at the rate of 1.5 percent of the customs value of the goods and shall be paid by the importer of such goods at the time of entering the goods for home use.
RV Pundit:
pretty much...find out how much we have collected from "railway development levy"...RDL..if we collect 1.5% of the import value...nearly 1.5-2 trillion...then this can be self-financing..without the need to chip in our taxes. RDL can easily collect 30-40B annually.....and that in 15 yrs....can repay the loan.It only fair that those who use the railway line to import and export stuff pay for it.....so we don't burden somebody in Mandera who care less about the railway.
I see several issues with that optimistic scenario:
First, the 1.5% levy is only in "goods imported for home use", not on all imported goods.
Second, the levy has nothing to do with "who uses the railway"; it simply adds a tax to goods in a certain category, regardless of where they go and how they get there. "Home goods" that arrive in Mombasa and end up in Mandera---by road or camel---are taxed in the same manner as similar goods that end up, via train, in Nairobi. On the other hand, as I have noted above, exporters don't pay that levy, regardless of their use of the railway.
Third, customs duties are in the category of "easy prediction" and "easy collection", the latter being from the fact that the importer must pay at the time of goods-entry. KRA, by looking at past trends of whatever is imported in that category, should be able to easily make good predictions of what it can reasonably expect to collect. And collection ought not to be a large problem; therefore the difference between "target" and "collected" ought to be small.
Fourth (if I recall correctly): KRA's target for 2013/2014 was Sh 20 billion; for 2014/2015 it was Sh 22 billion. I believe both targets were missed and "collected" was less (although not by huge amounts). So:
- I don't see how "RDL can easily collect 30-40B annually" when it is barely managing to get easily predictable and easily collectable amounts that are well below that range.
- A substantial improvement over current rates cannot be achieved through "better collection", because there is almost no room there. On the other hand, KRA cannot make Kenyans suddenly import 1.5 to 2 times what they require for "home use".
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Thanks for the nitty grity. I am more the big picture guy and it good to have guys nit picking the little salient points..with ample helping of Mr. Google. You're of course wrong when you use the total projected tax to allude that RDL has fallen short of projection. It has always overshot its projection. We are collecting anything close to or more than 30B annually from RDL..and if we stick to it..we can repay the chinese debts without breaking a sweat.
http://www.cnbcafrica.com/news/east-africa/2014/07/16/kenya%E2%80%99s-railway-levy-collection-exceeds-target/
We started paying for the railway long time ago...with about 25-40b annually ...collected from railway dev levy that every importer and exporter pays.. with our revised GDP, our debts are sustainable.
The Railway Development Levy came into existence in 2013 (Finance Act 2013, No. 38 of 2013). So there have been only 2 years of collection ... not what I would call "long time ago". Also, exporters do not pay; the act states that
The levy shall be at the rate of 1.5 percent of the customs value of the goods and shall be paid by the importer of such goods at the time of entering the goods for home use.
RV Pundit:
pretty much...find out how much we have collected from "railway development levy"...RDL..if we collect 1.5% of the import value...nearly 1.5-2 trillion...then this can be self-financing..without the need to chip in our taxes. RDL can easily collect 30-40B annually.....and that in 15 yrs....can repay the loan.It only fair that those who use the railway line to import and export stuff pay for it.....so we don't burden somebody in Mandera who care less about the railway.
I see several issues with that optimistic scenario:
First, the 1.5% levy is only in "goods imported for home use", not on all imported goods.
Second, the levy has nothing to do with "who uses the railway"; it simply adds a tax to goods in a certain category, regardless of where they go and how they get there. "Home goods" that arrive in Mombasa and end up in Mandera---by road or camel---are taxed in the same manner as similar goods that end up, via train, in Nairobi. On the other hand, as I have noted above, exporters don't pay that levy, regardless of their use of the railway.
Third, customs duties are in the category of "easy prediction" and "easy collection", the latter being from the fact that the importer must pay at the time of goods-entry. KRA, by looking at past trends of whatever is imported in that category, should be able to easily make good predictions of what it can reasonably expect to collect. And collection ought not to be a large problem; therefore the difference between "target" and "collected" ought to be small.
Fourth (if I recall correctly): KRA's target for 2013/2014 was Sh 20 billion; for 2014/2015 it was Sh 22 billion. I believe both targets were missed and "collected" was less (although not by huge amounts). So:
- I don't see how "RDL can easily collect 30-40B annually" when it is barely managing to get easily predictable and easily collectable amounts that are well below that range.
- A substantial improvement over current rates cannot be achieved through "better collection", because there is almost no room there. On the other hand, KRA cannot make Kenyans suddenly import 1.5 to 2 times what they require for "home use".
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You're of course wrong when you use the total projected tax to allude that RDL has fallen short of projection. It has always overshot its projection. We are collecting anything close to or more than 30B annually from RDL..and if we stick to it..we can repay the chinese debts without breaking a sweat.
What gives you the idea that I am using total tax to discuss the RDL? Overshot what projection? And where do you get Sh. 30 billion annually?
Let's take the most recent financial year. The figures will be found in the treasury document Quarterly Economic and Budgetary Review, Fourth Quarter, Financial Year 2014/2015 (Aug 2015). Go page 18, and look at Table 5. For RDL:
- Target for 2014/2015: Sh. 22.9 billion
- Actual for 2014/2015: Sh. 18.4 billion
For 2013/2014, the target was Sh. 20.1 billion, collected was Sh. 19.7 billion.
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You had not provided any link. I have been reading about RDL (in news) since 2013 and everytime I see it passing it projections. This year it projected to collected 26B. If we keep collecting at that rate of progression, we damn should repay the railway line in 20yrs without touching taxes.
What gives you the idea that I am using total tax to discuss the RDL? And where do you get Sh. 30 billion annually?
Let's take the most recent financial year. The figures will be found in the treasury document Quarterly Economic and Budgetary Review, Fourth Quarter, Financial Year 2014/2015. Go page 18, and look at Table 5:
- Target for 2014/2015: Sh. 22.9 billion
- Actual for 2014/2015: Sh. 18.4 billion
For 2013/2014, the target was Sh. 20.1 billion, collected was Sh. 19.7 billion.
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Railway Development Levy (RDL) is an interesting one. Introduced last year to raise funds for the railway project, it has undoubtedly been a runaway success. Indeed it is the only tax that has consistently exceeded target in the last year
Read more at: http://www.standardmedia.co.ke/article/2000124205/why-kenya-revenue-authority-fails-to-meet-its-tax-targets
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You had not provided any link. I have been reading about RDL (in news) since 2013 and everytime I see it passing it projections.
I don't know what you have been reading or where. I will go by the actual figures from the Treasury; if you want to dispute them, please go ahead and provide a basis. You can find the report here:
http://www.treasury.go.ke/downloads/category/28-quarterly-budget-review.html
This year it projected to collected 26B. If we keep collecting at that rate of progression, we damn should repay the railway line in 20yrs without touching taxes.
What does the Sh. 26 billion mean? In 2013/2014, the target was Sh. 20.1 billion and collected was Sh. 19.7 billion. In 2014/2015, the target went to Sh. 22 billion, collected was Sh 18.4 billion. So targets are going up but less is being collected!
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Railway Development Levy (RDL) is an interesting one. Introduced last year to raise funds for the railway project, it has undoubtedly been a runaway success. Indeed it is the only tax that has consistently exceeded target in the last year
Read more at: http://www.standardmedia.co.ke/article/2000124205/why-kenya-revenue-authority-fails-to-meet-its-tax-targets
(As always, I "admire" the "determination" you show once you've made up your mind.)
That newspaper article indulges in hyperbole without giving any figures. The Treasury report, to which I have provided the link, provides the actual figures. I'll go with real figures from the Treasury over fantasy from The Standard.
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Taxes are never good for business. They only make the end products more expensive. Ask traders and manufacturers in Kenya today, the taxes on all products are are on an all time high. Manufacturing is becvoming very expensive in comparison to neighbouring countries.
Railway Development Levy (RDL) is an interesting one. Introduced last year to raise funds for the railway project, it has undoubtedly been a runaway success. Indeed it is the only tax that has consistently exceeded target in the last year
Read more at: http://www.standardmedia.co.ke/article/2000124205/why-kenya-revenue-authority-fails-to-meet-its-tax-targets
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Sounds like little details. Focus on the big picture. For once. 18.99 versu 21B is called nitpicking. That is not very important. What is important is that RDL is essentially paying off SGR. A little pain on every importer but the economy is getting a brand new railway which will reduce the cost of goods eventually. Right now our transport cost alone constitute nearly 50% of the cost of goods....against 15% which is the world average.
You had not provided any link. I have been reading about RDL (in news) since 2013 and everytime I see it passing it projections.
I don't know what you have been reading or where. I will go by the actual figures from the Treasury; if you want to dispute them, please go ahead and provide a basis. You can find the report here:
http://www.treasury.go.ke/downloads/category/28-quarterly-budget-review.html
This year it projected to collected 26B. If we keep collecting at that rate of progression, we damn should repay the railway line in 20yrs without touching taxes.
What does the Sh. 26 billion mean? In 2013/2014, the target was Sh. 20.1 billion and collected was Sh. 19.7 billion. In 2014/2015, the target went to Sh. 22 billion, collected was Sh 18.4 billion. So targets are going up but less is being collected!
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Not all products. But certain products, cars, beer, cigaretters, bottle waters,. But certainly under Jubilee INFLATION has come down. Cost of Unga & Sugar has been stuck there and has actually reduced. Cost of electricity is down (that should have manufactures smiling) and now electricity is become more reliable.
Money has to come from somewhere.................. taxes and levies...or well aids, grants.
We need to build better roads, more rail lines, and generally more infrastructures (power, water, sewage);
GoK is devolving 250B every year..directly from Consolidated Fund...that is going to counties..who are now doing things unimaginable a few years ago.
Taxes are never good for business. They only make the end products more expensive. Ask traders and manufacturers in Kenya today, the taxes on all products are are on an all time high. Manufacturing is becvoming very expensive in comparison to neighbouring countries.
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Sounds like little details. Focus on the big picture. For once. 18.99 versu 21B is called nitpicking.
It has always overshot its projection. We are collecting anything close to or more than 30B annually from RDL..and if we stick to it..we can repay the chinese debts without breaking a sweat.
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When Wembley stadium was constructed , a contractual obligation was placed on the British Football Association to ensure that a certain minimum number of top flight matches we played in Wembley per year for several years. This guaranteed enough regular income to help repay the loan used to build the stadium.
Same principle being applied to ensure SGR can generate enough revenue to repay the loan.
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@ Moonki,
Obviously the fact that some london based top premiership club gave wembley stadium a miss was a big blow.
Wembley relies on FA tournament and championship league matches , American football etc which are not enough.
There are plans to ensure that most containers from ports are transported by rail. Watu wapende wasipende. And to impose punitive penalty on those who use the road.
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When Wembley stadium was constructed, a contractual obligation was placed on the British Football Association to ensure that a certain minimum number of top flight matches we played in Wembley per year for several years. This guaranteed enough regular income to help repay the loan used to build the stadium.
Same principle being applied to ensure SGR can generate enough revenue to repay the loan.
That's an interesting concept. In the case of the SGR, I take it that would mean ensuring certain volumes of cargo, at certain charges. Who would do that?
Returning to Wembley Stadium: I take it you mean the FA, rather than the British Football Association, an organization that does not appear to have lasted very long. The stadium also involved a public-private partnership, not just the sinking of public money only. One significance of that was that when the government negotiated contractual obligations to "protect the public interest", it accepted that its interests would rank below those of the banks who were providing the larger chunk of the money. I also believe that the obligation that the FA play certain games there is limited only to games involving the national team and for a certain number of years.
At any rate, I see little in the Wembley Stadium case to recommend it as an exemplary model for SGR loan repayments.
From Football Economy in 2012:
Wembley Stadium a financial albatross: ... Accounts for Wembley National Stadium, a wholly owned subsidiary of the FA, show that the huge cost of constructing the home of the national team continues to weigh heavily on its finances. A significant fall in income or delay in large payments could force the company to break the terms of its bank loans
http://www.footballeconomy.com/content/wembley-stadium-financial-albatross
In 2015, yet another re-financing, consisting of a new loan of 300 million pounds:
http://www.theguardian.com/football/2015/oct/11/fa-refinances-wembley-stadium-debt-consortium-banks-reinvestment-football
So, I am surprised by the statement that
This guaranteed enough regular income to help repay the loan used to build the stadium.
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There are plans to ensure that most containers from ports are transported by rail. Watu wapende wasipende. And to impose punitive penalty on those who use the road.
That could be done, but it then raises another interesting issue: RVR claims that it is preparing for, and will be ready for, competition from the SGR. Punitive penalties on road users will also make RVR more attractive, so it does not necessarily guarantee great days for the SGR.
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Time will tell.
There are plans to ensure that most containers from ports are transported by rail. Watu wapende wasipende. And to impose punitive penalty on those who use the road.
That could be done, but it then raises another interesting issue: RVR claims that it is preparing for, and will be ready for, competition from the SGR. Punitive penalties on road users will also make RVR more attractive, so it does not necessarily guarantee great days for the SGR.
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RVR concession will end soon (15yrs remaining) and Kenya gov will take over the rail, and upgrade the MGR to SGR.
That could be done, but it then raises another interesting issue: RVR claims that it is preparing for, and will be ready for, competition from the SGR. Punitive penalties on road users will also make RVR more attractive, so it does not necessarily guarantee great days for the SGR.