HK What % of GDP is Sustainable for Kenya

[Omollo]

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No doubt you are aware that the National Debt is now 53% of the GDP. That is before the latest borrowing by Uhuru over the weekend is added.

So let me hear from you, since I believe you are one of those who do not think Uhuru is screwing up the country (if he has not already done so). What % of sustainable? At what point does the danger of default become a reality?

[Omollo]

[Omollo]

While at it, explain to me why a shorter distance of the SGR will cost more than the longer portion.

[Nefertiti]

The risk is on achievability of returns which is not guaranteed.  We nee to go slow on borrowing .

IMF and World Bank std for sustainable debt:

1. max 60% of GDP vs our 52.6%
2.1 external debt max 150% of exports vs our 368%
Or
2.2 external debt max 250% of revenues vs our 284%

[Georgesoros]

uhuru is on a spending spree without any accountability. There is no guaranteee of a return from the current system, so it will be prudent to keep planning.

The risk is on achievability of returns which is not guaranteed.  We nee to go slow on borrowing .

IMF and World Bank std for sustainable debt:

1. max 60% of GDP vs our 52.6%
2.1 external debt max 150% of exports vs our 368%
Or
2.2 external debt max 250% of revenues vs our 284%

[Georgesoros]

BTW all things considered. Has there been any significant economic growth after the first SGR?

[RVtitem]

BTW all things considered. Has there been any significant economic growth after the first SGR?

That depends where you refer to:
-China
-Kenya
-uhuruto bank accounts and those of cronies
-Average kenyans

[hk]

Kenya has had infrastructure deficit of about 20yrs so investment in infrastructure is prudent.The problem with this borrowing is the funds aren't ring fenced for specific projects. Also the local borrowing has ratcheted up, which has led banks to pile up on treasury bills instead of changing their business model to lend to private sector. Economic statistics show that government spending has increased, FDI has increased, the only problem is the private sector and household spending hasn't kept pace with rest of the economy. If we keep borrowing at around 50% and then ring fence funds to specific projects that will suffice. The biggest problem is how to get the private sector moving. In my humble opinion the keysian model has ran out of steam.

[RV Pundit]

Borrow lot more esp from China and invest lot more in infrastructure

[Omollo]

HK

You are not the first to declare Keynesian Economics dead. The Americans led the charge throughout the 70s to the 90s until their Great Economic Crisis of 2007 when they had to dust up the theory. I think the constant declaration of the death of Keynesian Economics has become a cliche rapidly ignored when the same pall bearers realize the coffin is empty.

My question was what percentage of GDP is sustainable. At what point is the danger of default highest. I expected you to draw from historical examples elsewhere. I think both you and Pundit have deliberately avoided answering the question because you know the truth to be unsavory - especially when Jubilee is telling Kenyans how well it has succeeded and so on.

Here is a brief extract from "", by Victor A. Beker:

This reflects the path dependency existing in decision-making: once you make a considerable wrong bet, you are doomed to increase it in order to try to save your initial investment.

Kenya has had infrastructure deficit of about 20yrs so investment in infrastructure is prudent.The problem with this borrowing is the funds aren't ring fenced for specific projects. Also the local borrowing has ratcheted up, which has led banks to pile up on treasury bills instead of changing their business model to lend to private sector. Economic statistics show that government spending has increased, FDI has increased, the only problem is the private sector and household spending hasn't kept pace with rest of the economy. If we keep borrowing at around 50% and then ring fence funds to specific projects that will suffice. The biggest problem is how to get the private sector moving. In my humble opinion the keysian model has ran out of steam.

[Omollo]

Borrow lot more esp from China and invest lot more in infrastructure

Does that mean because we borrow from China, we will not repay?

Could you name some of the projects financed by the Eurobond? Kibaki borrowed 20 Billion and put up the Thika road and revamped the road network in Nairobi. What did 176 Billion do?

[RV Pundit]

Chinese loans are best out there bar condition laden wb and IMF .we need to take advantage of them.plus take advantage of Chinese contractors ability to execute projects on time n budget.thika road in mchezo...we need serious stuff like sgr,lapset,galana 1m acres.

[RV Pundit]

The ability to borrow so much and pay so little has not always been there...we are lucky to live in this China era.Take full advantage.

[Omollo]

Chinese loans are best out there bar condition laden wb and IMF .we need to take advantage of them.plus take advantage of Chinese contractors ability to execute projects on time n budget.thika road in mchezo...we need serious stuff like sgr,lapset,galana 1m acres.

• what are the conditions of the Chinese loans?
• Do the conditions include repayment?
• When you say "better" what comparison have you undertaken? Would you like to share?

I also assume that you know most of the loans taken by Uhuru are not for the two institutions that you mock.

I want to believe you that Thika road is child's play. After all only 20 billion shillings were used on it. Now show me what 176 Billions were used on? I expect something enormous. May be an 8 lane road from Mombasa to Kampala

[Georgesoros]

Chinese loans are best out there bar condition laden wb and IMF .we need to take advantage of them.plus take advantage of Chinese contractors ability to execute projects on time n budget.thika road in mchezo...we need serious stuff like sgr,lapset,galana 1m acres.

Yes I agree. Chinese loans are sub prime loans. This means you borrow a loan meant for a specific task but you use it for something else. These loans are easy to get but since the lender doesn't follow up you can do anything with it. If the money doesn't generate income the borrower goes into distress when the lender comes knocking.

[RV Pundit]

Not true.China loans are ring fenced and executed by Chinese themselves. Beside why worry about China the lender.Africa has huge opportunity here.We got Sgr in 3yrs..that huge

[Omollo]

Not true.China loans are ring fenced and executed by Chinese themselves. Beside why worry about China the lender.Africa has huge opportunity here.We got Sgr in 3yrs..that huge

So what percentage is sustainable? I am hoping you have now had time to digest your figures as usual and can share

[RV Pundit]

All Chinese loans are sustainable. Chinese to the maths before sending their contractors down here.

[Omollo]

All Chinese loans are sustainable. Chinese to the maths before sending their contractors down here.

So as long as we borrow from China, that can be kept off the books and all will be well.

The problem is that the "good" Chinese loans get added up to the books anyway and that raises the ratio high any way.

As in the Argentina case or the ongoing Venezuela saga, once a country defaults the effects are the same regardless of which loans are "good". Venezuela may get a pass and avoid punitive interests from China (not that it is confirmed) but the other creditors have reacted anyway. I doubt that those who lent us the Eurobond will sleep easy knowing that we are unable to service the Chinese debt. And any way once you default it doesn't matter who is good or not, does it?

These debts are maturing soon.

Any way, I note that you are unable or unwilling to state what percentage is sustainable.

You can have mine: The moment they hit 40% it had gone too far.

[hk]

HK

You are not the first to declare Keynesian Economics dead. The Americans led the charge throughout the 70s to the 90s until their Great Economic Crisis of 2007 when they had to dust up the theory. I think the constant declaration of the death of Keynesian Economics has become a cliche rapidly ignored when the same pall bearers realize the coffin is empty.

My question was what percentage of GDP is sustainable. At what point is the danger of default highest. I expected you to draw from historical examples elsewhere. I think both you and Pundit have deliberately avoided answering the question because you know the truth to be unsavory - especially when Jubilee is telling Kenyans how well it has succeeded and so on.

I can very easily post a counter argument against keynesian. The point is the debt level isn't alarming and can even go up to 80% of GDP. The key aspect is access to credit market. The Eurobond for example can be very easily be rolled over, just like what the government rolls over treasury bills upon maturity. The key factor is keeping the fundamentals so that access to credit market is assured without raising the interest rates on debt. In the open market the Eurobond yield is trading at 5.87% lower than when it was issued.