kenya debt at dangerous levels - 60% debt to gdp with repayment at 40% of taxes

[RV Pundit]

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https://cytonnreport.com/research/kenya---s-public-debt--should-we-be-concerned----cytonn-weekly--7-2018#focus-of-the-week

[hk]

Moody's had predicted that last year. soon kenya will have no other option other than to embark on major privatization and liberalization to raise funds and ease debt burden. The grandiose projects will have to be shelved. The new eurobond funds which roadshow has kicked off are to be used to pay earlier eurobond and syndicate loan (not for development just retire debt) https://www.bloomberg.com/news/articles/2018-02-07/kenya-is-said-to-pick-citi-jpmorgan-to-advise-on-eurobond-sale .  The interest rates will remain high unless government stop borrowing which is unlikely. Its unlikely that KRA will be able to collect more taxes without forcing formal companies or companies and individuals to go underground(informal). Basically the era of big government in kenya is slowly but surely coming to an end or At least I hope so.

[RV Pundit]

I totally agree. Time for treasury some parastals..chiefly National Oil and Safaricom. If GOK sold it's 25% share in Safaricom..that would set them 250B.

Moody's had predicted that last year. soon kenya will have no other option other than to embark on major privatization and liberalization to raise funds and ease debt burden. The grandiose projects will have to be shelved. The new eurobond funds which roadshow has kicked off are to be used to pay earlier eurobond and syndicate loan (not for development just retire debt) https://www.bloomberg.com/news/articles/2018-02-07/kenya-is-said-to-pick-citi-jpmorgan-to-advise-on-eurobond-sale .  The interest rates will remain high unless government stop borrowing which is unlikely. Its unlikely that KRA will be able to collect more taxes without forcing formal companies or companies and individuals to go underground(informal). Basically the era of big government in kenya is slowly but surely coming to an end or At least I hope so.

[Georgesoros]

https://www.bloomberg.com/news/articles/2018-02-19/kenya-lost-imf-facility-last-year-someone-tell-the-central-bank

Well Well Well
Its gonna be a rough ride.

[Kadudu]

The rough ride was predicted some years back. Jubilee government has tripled Kenya's external debt in less than 5 years. How can that end well? Many of the loans taken since 2013 are yet to mature. We still have a grace period like the loan for the SGR. Let us see what happens when the grace period ends or we can start praying for manna from heaven.

https://www.bloomberg.com/news/articles/2018-02-19/kenya-lost-imf-facility-last-year-someone-tell-the-central-bank

Well Well Well
Its gonna be a rough ride.

[Georgesoros]

The rough ride was predicted some years back. Jubilee government has tripled Kenya's external debt in less than 5 years. How can that end well? Many of the loans taken since 2013 are yet to mature. We still have a grace period like the loan for the SGR. Let us see what happens when the grace period ends or we can start praying for manna from heaven.

https://www.bloomberg.com/news/articles/2018-02-19/kenya-lost-imf-facility-last-year-someone-tell-the-central-bank

Well Well Well
Its gonna be a rough ride.

Uhurutos won't feel a pinch. The middle class will be starved. The auditor general was nearly run off the road when he dared mention of high debt. Pundits were busy saying the economy will override the debt, but we will wait and see.
To be fair the USA is going through the same thing, borrow and spend.

[bryan275]

Rutos chance to spend his hard earned money on kplc and other low hanging fruit.

[RV Pundit]

I think they will be mostly sold thro IPOS. But we definitely need to sell Safaricom & National Oil plus all sugar companies owned by the states. Telkom could also be sold if there were someone stupid enough to buy it.

Rutos chance to spend his hard earned money on kplc and other low hanging fruit.

[Kichwa]

This will just open up more opportunities for these thieves to steal even more. Do you really think they will use the proceeds to pay the debt when this will present to them a perfect opportunity to steal, plunder and loot. You cannot satisfy Ruto's appetite for stealing.

Rutos chance to spend his hard earned money on kplc and other low hanging fruit.

[hk]

Moi government did the initial liberalization of kenya economy not because they wanted to but because they had to. That tipping point is fast approaching where there would be no option other than privatization and full liberalization of the economy. For people who care about economic freedom this a great thing.  With free economy the so called "state capture" which is clearly stifling economic growth would be eliminated.

[gout]

Corrupt systems are very interesting. While on one end the Treasury will be crying about debts those who have been stealing are seeing opportunities to launder their loot through more loans at a higher interest rate than previous. Capitalism without safeguards is like a cancerous cell.

[RV Pundit]

Exactly. This will unlock some sectors. Although there is case for gok staying longer in some sectors and probably investing in others..but definitely I don't see why Treasury should own Safaricom when it get taxes and CA is in control. Also a chance for FDI and to grow to capital market.

Moi government did the initial liberalization of kenya economy not because they wanted to but because they had to. That tipping point is fast approaching where there would be no option other than privatization and full liberalization of the economy. For people who care about economic freedom this a great thing.  With free economy the so called "state capture" which is clearly stifling economic growth would be eliminated.

[Nefertiti]

$3B more debt coming...

Kenya starts dollar bond sale despite IMF hurdle
http://www.mediamaxnetwork.co.ke/business/411938/kenya-starts-dollar-bond-sale-despite-imf-hurdle/

[Georgesoros]

$3B more debt coming...

Kenya starts dollar bond sale despite IMF hurdle
http://www.mediamaxnetwork.co.ke/business/411938/kenya-starts-dollar-bond-sale-despite-imf-hurdle/

Govt is no different than an individual. Once you start borrowing from Peter to pay Paul, then soon enough the juggling will run out.
On another note, I listened to Atwoli yesterday and the guy is a very practical and brilliant guy. I was surprised to learn that the big guys who drive big Range Cars rarely pay their taxes, leaving more burden to the middle class.

[hk]

Government successfully issued another eurobond https://www.businessdailyafrica.com/markets/capital/Kenya-says-fresh--2bn-Eurobond-oversubscribed-seven-times/4259442-4315350-14pr01l/index.html  with longer maturity. The proceeds will pay $800m syndicate and Eurobond first tranche payment of $750m so atotal of $1.55b is to payback loans. The longer maturity means the government is buying more time but will end up paying higher interest rates.

[hk]

As expected government has to raise taxes to reduce the budget deficit to more manageable level  https://www.businessdailyafrica.com/news/Treasury-to-collect-Sh71bn-IMF-new-petrol-taxes--/539546-4325672-3igckbz/index.html . charging vat on fuel is easy by it will increase inflation and cost of doing business. SGR was suppose to increase 1.5% GDP growth, that hasn't materialized. In addition treasury has been forced to scrap interest caps (terrible law to start with) https://www.businessdailyafrica.com/economy/Treasury-plans-consumer-Bill-to-replace-rate-caps/3946234-4325160-1p5s9sz/index.html .  The head of ways and means committee is ichungwa, seriously jubilee is joking, they should get someone at least have way serious like kimunya.

[RV Pundit]

Yeah things not working out - I see SGR despite rock bottom prices (20K for 20 feet container) is struggling to attract cargo?

As expected government has to raise taxes to reduce the budget deficit to more manageable level  https://www.businessdailyafrica.com/news/Treasury-to-collect-Sh71bn-IMF-new-petrol-taxes--/539546-4325672-3igckbz/index.html . charging vat on fuel is easy by it will increase inflation and cost of doing business. SGR was suppose to increase 1.5% GDP growth, that hasn't materialized. In addition treasury has been forced to scrap interest caps (terrible law to start with) https://www.businessdailyafrica.com/economy/Treasury-plans-consumer-Bill-to-replace-rate-caps/3946234-4325160-1p5s9sz/index.html .  The head of ways and means committee is ichungwa, seriously jubilee is joking, they should get someone at least have way serious like kimunya.

[Empedocles]

Anyone here read the Eurobond 2 prospectus?

[pdf]http://www.ise.ie/debt_documents/Final%20Prospectus%2026.02_7af525f0-c8ad-4270-977f-56a7e5a1cd42.PDF[/pdf]

[Georgesoros]

Anyone here read the Eurobond 2 prospectus?

[pdf]http://www.ise.ie/debt_documents/Final%20Prospectus%2026.02_7af525f0-c8ad-4270-977f-56a7e5a1cd42.PDF[/pdf]

Argentina, Greece,  Portugal, all these countries took in debt like crazy in 1990s, then came the payments.......
Kenya is taking way too much debt.

[hk]

Anyone here read the Eurobond 2 prospectus?

[pdf]http://www.ise.ie/debt_documents/Final%20Prospectus%2026.02_7af525f0-c8ad-4270-977f-56a7e5a1cd42.PDF[/pdf]

Thanks for posting the prospectus. Looking at use of proceeds and distribution plan its clear this bond is for paying syndicate loans. The risk, especially budget deficit is one of key risks highlighted. On the positive note, by accessing global debt markets kenya will be forced to make the necessary reforms needed. Already IMF is leading the way to ensure market reforms are implemented.