Interest rate capping gone...

[RV Pundit]

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https://mobile.nation.co.ke/news/MPs-agree-with-Uhuru-on-repealing-interest-caps/1950946-5329594-item-1-12yatbez/index.html

[Georgesoros]

No comment!

[hk]

This is the first step in righting the monetary policy. Clearly capping of rates has enabled government to borrow cheaply locally at the expense of private sector. Also kenya is begging IMF to standby insurance loan for $1.5b and removing caps is one of the conditions. Treasury will be forced to borrow at higher interest rates which ultimately will force treasury to reduce borrowing. 

[RV Pundit]

It would be a shame for gov to go lean instead of continuing with public investment.Koimett should be made the treasury ps and tasked with privitisation so gok can sell likes of Safaricom to finance public investment in roads, water & sanitation, and subsidized power for industrial consumption.A country that has only 15-20% of it's road paved is going no where.Cities where hand carts are selling water is also going nowhere.And electricity 3-4 times what our neighbors charge is crazy.These affect economy in more fundamental way. .higher transport cost, high energy cost..have a multiplier effect. Privitisation will also help grow the private sector and reduce graft.

[hk]

It would be a shame for gov to go lean instead of continuing with public investment.Koimett should be made the treasury ps and tasked with privitisation so gok can sell likes of Safaricom to finance public investment in roads, water & sanitation, and subsidized power for industrial consumption.A country that has only 15-20% of it's road paved is going no where.Cities where hand carts are selling water is also going nowhere.And electricity 3-4 times what our neighbors charge is crazy.These affect economy in more fundamental way. .higher transport cost, high energy cost..have a multiplier effect. Privitisation will also help grow the private sector and reduce graft.

No one  is against infrastructure investment on key things but its how and at what expense. I agree government should privatize all its shareholdings starting with safcom,kcb,kengen,kplc etc. Then either privatize all parastatals or shut them down. Parastatals are one of the biggest leeches in kenyans budget, free up those funds to invest in infrastructure. Esther koimett was one of the so called technocrats who were advocating for nationalization of KQ, that's the wrong mindset.

[RV Pundit]

We badly need public investment in infrastructure - I don't think our unit cost say of tarmacking or etc - are out of these world - they seem to be about the same that Uganda or Tanzania or Ethiopia pay - if you compare apples with apples. The corruption is 10% - and should not stop us from badly needed investments in roads, rails, ports, water & sanitation, irrigation, TIVETS, SEZs and etc. Our anti-corruption fight is finally coming along - the asset seizure for me has been the turning point - it appears you don't have to be guilty - for gok to take away any wealth you cannot explain it's source.

Kibaki under kimunya was able to reduce budget deficit by financing the budget thro privatization proceeds. Koimett was the center of that. Those that need to be privatize - are those that are mature enough to survive on their own i.e Safaricom or those hopeless - like sugar companies.

I also agree with Koimett on nationalizing KQ and or giving them JKIA - so they can have a chance against the Emirates & Ethiopians airlines that are under gov patronage. That is what gov really ought to do - protect or start infant industries like they did Safaricom - and exit when they mature - and rescue those national assets like KQ that are too big or critical to fail.

If Uhuru cut back budget spending - the private sector will grow - and public sector will drag it down - it will be down to usual 4%. The music should not stop. Public investment and Private Investment are the twin engines that can get us cruise on auto-pilot to middle class before 2030.

So it's critical the substantive minister of finance when finally appointed - will be somebody like Kimunya - who can put on fire sale KCB, Safaricom,Consolidated Bank, Mumias, Miwani, Muhoroni, Sony,New KCC, KPA, KENGEN, KP,KPL -
And hopefully the money can be put say in Infrastructure Deficit Fund - ring-fenced specifically for basic infrastructure - see off LAPSSET, improve paved roads to at least 50% of all classified roads tarmacked, universal electricity (on course),water and sanitation. Leave the likes of Kengen & private power producers to fix the power supply (with regulator ERC - making sure they are fairly charging), also leave independent & private KAA, KPL & KPA - to build airports, ports and pipeline - gok can keep 40% shareholding because they are critical services.

No one  is against infrastructure investment on key things but its how and at what expense. I agree government should privatize all its shareholdings starting with safcom,kcb,kengen,kplc etc. Then either privatize all parastatals or shut them down. Parastatals are one of the biggest leeches in kenyans budget, free up those funds to invest in infrastructure. Esther koimett was one of the so called technocrats who were advocating for nationalization of KQ, that's the wrong mindset.

[RV Pundit]

Banks shares on steroid. The loan binge begins.

[hk]

We badly need public investment in infrastructure - I don't think our unit cost say of tarmacking or etc - are out of these world - they seem to be about the same that Uganda or Tanzania or Ethiopia pay - if you compare apples with apples. The corruption is 10% - and should not stop us from badly needed investments in roads, rails, ports, water & sanitation, irrigation, TIVETS, SEZs and etc. Our anti-corruption fight is finally coming along - the asset seizure for me has been the turning point - it appears you don't have to be guilty - for gok to take away any wealth you cannot explain it's source.

Kibaki under kimunya was able to reduce budget deficit by financing the budget thro privatization proceeds. Koimett was the center of that. Those that need to be privatize - are those that are mature enough to survive on their own i.e Safaricom or those hopeless - like sugar companies.

I also agree with Koimett on nationalizing KQ and or giving them JKIA - so they can have a chance against the Emirates & Ethiopians airlines that are under gov patronage. That is what gov really ought to do - protect or start infant industries like they did Safaricom - and exit when they mature - and rescue those national assets like KQ that are too big or critical to fail.

If Uhuru cut back budget spending - the private sector will grow - and public sector will drag it down - it will be down to usual 4%. The music should not stop. Public investment and Private Investment are the twin engines that can get us cruise on auto-pilot to middle class before 2030.

So it's critical the substantive minister of finance when finally appointed - will be somebody like Kimunya - who can put on fire sale KCB, Safaricom,Consolidated Bank, Mumias, Miwani, Muhoroni, Sony,New KCC, KPA, KENGEN, KP,KPL -
And hopefully the money can be put say in Infrastructure Deficit Fund - ring-fenced specifically for basic infrastructure - see off LAPSSET, improve paved roads to at least 50% of all classified roads tarmacked, universal electricity (on course),water and sanitation. Leave the likes of Kengen & private power producers to fix the power supply (with regulator ERC - making sure they are fairly charging), also leave independent & private KAA, KPL & KPA - to build airports, ports and pipeline - gok can keep 40% shareholding because they are critical services.

No one  is against infrastructure investment on key things but its how and at what expense. I agree government should privatize all its shareholdings starting with safcom,kcb,kengen,kplc etc. Then either privatize all parastatals or shut them down. Parastatals are one of the biggest leeches in kenyans budget, free up those funds to invest in infrastructure. Esther koimett was one of the so called technocrats who were advocating for nationalization of KQ, that's the wrong mindset.

You can't borrow so much as to hamper the private sector that is suppose to pay taxes to repay for those loans. The problem with jubilee government apart from rampant corruption, crazy regulation and enforcement is the obsession with grandiose projects with little return on investment. Having universal electricity connection matters little when the connections are subsidized and 800kto 1m  are idle connections.  The prudent thing would have been to generate cheap power by constructing a natural gas pipeline from TZ then have kengen invest in a natural gas fired power plant. Also address transmission issues. 

[RV Pundit]

How does gov borrowing hamper private sector? I think you're confusing private banks refusing to lend the private sector because of rate capping - with gov squeezing out private sector from loans. This is the Njomo policy gone wrong. But I am glad we tried. Policy experimentation should be the norm.

Now when it come to electricity - Jubilee has driven electricity connection from I think 2m to now 7M household. That is huge. Now is upon KPLC & Power producers to drive usage up - by selling idle power cheaply. Obviously the biggest problem is 30yr guarantee we signed with individual power producers....so we cannot just turn of diesel plants..some will be there until 2030.

And now that we have idle power - KPLC should not be signing any take or pay contract - the existing should be honored but new contracts - should be on - cheapest basis.

You can't borrow so much as to hamper the private sector that is suppose to pay taxes to repay for those loans. The problem with jubilee government apart from rampant corruption, crazy regulation and enforcement is the obsession with grandiose projects with little return on investment. Having universal electricity connection matters little when the connections are subsidized and 800kto 1m  are idle connections.  The prudent thing would have been to generate cheap power by constructing a natural gas pipeline from TZ then have kengen invest in a natural gas fired power plant. Also address transmission issues. 

[hk]

How does gov borrowing hamper private sector? I think you're confusing private banks refusing to lend the private sector because of rate capping - with gov squeezing out private sector from loans. This is the Njomo policy gone wrong. But I am glad we tried. Policy experimentation should be the norm.

Now when it come to electricity - Jubilee has driven electricity connection from I think 2m to now 7M household. That is huge. Now is upon KPLC & Power producers to drive usage up - by selling idle power cheaply. Obviously the biggest problem is 30yr guarantee we signed with individual power producers....so we cannot just turn of diesel plants..some will be there until 2030.

And now that we have idle power - KPLC should not be signing any take or pay contract - the existing should be honored but new contracts - should be on - cheapest basis.

You can't borrow so much as to hamper the private sector that is suppose to pay taxes to repay for those loans. The problem with jubilee government apart from rampant corruption, crazy regulation and enforcement is the obsession with grandiose projects with little return on investment. Having universal electricity connection matters little when the connections are subsidized and 800kto 1m  are idle connections.  The prudent thing would have been to generate cheap power by constructing a natural gas pipeline from TZ then have kengen invest in a natural gas fired power plant. Also address transmission issues. 

Credit growth started cratering way before capping of interest rates https://www.brookings.edu/blog/africa-in-focus/2017/12/22/figures-of-the-week-private-credit-growth-slows-in-kenya/ . Why cause the government literally doubled domestic borrowing from 2014 which crowded out the private sector. This is the problem.

[RV Pundit]

Banks gain 38b in one day. Bad old or good days back.
https://www.businessdailyafrica.com/news/Bank-shares-gain-Sh38bn-in-a-day-on-rate/539546-5331184-r4k2ce/index.html

[RV Pundit]

But it around same time we floated Eurobond - and Chinese SGR are external. Private sector hopefully will wake up and compete with treasury for credit.

Credit growth started cratering way before capping of interest rates https://www.brookings.edu/blog/africa-in-focus/2017/12/22/figures-of-the-week-private-credit-growth-slows-in-kenya/ . Why cause the government literally doubled domestic borrowing from 2014 which crowded out the private sector. This is the problem.

[vooke]

Problem is not with capping but government domestic borrowing on steroids. As long as they compete with businesses, the businesses will end up losing regardless of the interest rate levels. If Jubilee timed their appetite the banks would have no choice but to lend to the public regardless of the capping

[hk]

But it around same time we floated Eurobond - and Chinese SGR are external. Private sector hopefully will wake up and compete with treasury for credit.

Credit growth started cratering way before capping of interest rates https://www.brookings.edu/blog/africa-in-focus/2017/12/22/figures-of-the-week-private-credit-growth-slows-in-kenya/ . Why cause the government literally doubled domestic borrowing from 2014 which crowded out the private sector. This is the problem.

We floated euro bonds and still doubled domestic debt, that's the tragedy of jubilee government. Private sector can't compete with government that's the whole point of the economic term crowding out of private sector. This things matter in an economy.

[Pragmatic]

Exactly HK, the credit crowd-out to private sector started way before the interest rate capping.... generally there has not be any available credit to private sector MSME's or if at all it was always very expensive. There has to be another cure/solution to MSME's credit. The uncapping doesn't mean or guarantee that all of a sudden the MSME's will have easy access to credit. The only thing this does is to give banks another increase in their net profit through expensive loans.

Let us settle this once and for all, the UhuRuto regime has been bad for business. The economy is down, GoK is dead broke and the un-imaginative infrastructure binge borrowing and wanton theft has had the ripple effect of killing the MSME's through the unlawful long credit benefit many public entities have enjoyed by not paying them for services rendered. Many SME's have been foreclosed or had no choice but to scale down operations. MSME's are the engine of any economy and these have been going belly up a dime a dozen (on a daily basis!).

Pundit and his snake-oil salesmen live in their own lala-land with their fake GDP growth projections.

Credit growth started cratering way before capping of interest rates https://www.brookings.edu/blog/africa-in-focus/2017/12/22/figures-of-the-week-private-credit-growth-slows-in-kenya/ . Why cause the government literally doubled domestic borrowing from 2014 which crowded out the private sector. This is the problem.

[RV Pundit]

Empirical evidence suggest otherwise. It suggests UhuRuto have grown the economy on average 5.6% - that is higher than any previous regime. Without any MSME or SME data - you're just cropping in the dark. Jubilee have delivered infrastructure, improved business enviroment (now sitting proudly no 56 in world bank 'ease of doing business' - which include ease of getting credit'). Empirical evidence suggest Jubilee have built more roads in less than 10yrs than all the 3 regime combined did in 50yrs.Jubilee have added more than 5M household to the grid (20M kenyans) and are on course for universal access.
Poverty is down - emperical data suggest. We will soon have census.

And Jubilee have done this without selling any gov assets. Yes debt to gdp has increased - yes Jubilee has borrowed 40B dollars - compared to 12B kibaki did - but most of it has been invested in infrastructure that will outlast Jubilee - 5B dollars SGR will last 100yrs for example.

Exactly HK, the credit crowd-out to private sector started way before the interest rate capping.... generally there has not be any available credit to private sector MSME's or if at all it was always very expensive. There has to be another cure/solution to MSME's credit. The uncapping doesn't mean or guarantee that all of a sudden the MSME's will have easy access to credit. The only thing this does is to give banks another increase in their net profit through expensive loans.

Let us settle this once and for all, the UhuRuto regime has been bad for business. The economy is down, GoK is dead broke and the un-imaginative infrastructure binge borrowing and wanton theft has had the ripple effect of killing the MSME's through the unlawful long credit benefit many public entities have enjoyed by not paying them for services rendered. Many SME's have been foreclosed or had no choice but to scale down operations. MSME's are the engine of any economy and these have been going belly up a dime a dozen (on a daily basis!).

Pundit and his snake-oil salesmen live in their own lala-land with their fake GDP growth projections.

Credit growth started cratering way before capping of interest rates https://www.brookings.edu/blog/africa-in-focus/2017/12/22/figures-of-the-week-private-credit-growth-slows-in-kenya/ . Why cause the government literally doubled domestic borrowing from 2014 which crowded out the private sector. This is the problem.