Parliament defy IMF and Banks - DOUBLE DOWN on the Interest Capping

[hk]

where does this leave Jubilee 4 pillars? in uhuru's head? and how will Ruto campaign on jubilee development agenda after URP has sabotaged Jubilee 4 pillars?  seem like URP wing of jubilee is determined to bring down the government through economic collapse. the sooner uhuru listen to IMF the better.

Parliament is on fire. Rejected Vat on fuel, housing fund, scrapping of interest rates and today robin hood tax https://www.the-star.co.ke/news/2018/08/30/mps-reject-tax-on-huge-cash-transfers_c1811155 . Parliament should also reject increased excise tax on mobile money transfer. Parliament is literally starving the beast. The only thing disagree with is maintaining of interest rates spread. This is unwittingly giving treasury cheap credit while crowding out private sector. Treasury will have to scale down the 2018 budget, or run a ridiculous 10% budget deficit.

I think more than anything else its the realization that government can't increase taxes. There's no room for higher taxes and also government can't borrow more. Jubilee has irresponsibly borrowed and invested in projects with negative return. Actually by rejecting higher taxes the Mps are salvaging the economy. Uhuru is delusion if he thinks that its possible to achieve big 4 without funding. Austerity measures needs to be enacted immediately. Jubilee economic model of heavy borrowing,high taxes and profligate expenditures has collapsed.

[vooke]

They need to figure out how to weed those few in unsecured loans and provision for it.Banks are still making profit.

90% of kenyan do not default so that huge segment that is as good as lending to treasury.Banks do not have to lend to risk customers and they have crb and other tools.

So which is this bank that would lend to businesses and individuals at lower rate than government?

The ratio of gross non-performing loans to gross loans increased from 10.66 percent in December 2017 to 11.81 percent in March 2018
https://www.centralbank.go.ke/uploads/banking_sector_reports/97419934_Credit%20Survey%20Report%20for%20the%20Quarter%20ended%20March%202018.pdf

Problem is to meet the 90% good you have to lend to everyone including the 12% who are bad. So if your interest is anything less than 12% then you are not in business. But his 12% is industry rate. Individual banks like KCB have a much lower rate

Banks turn in billions from hundreds of billions of assets. Their real returns are not that sexy. Look at how much assets KCB takes to rake in their profits

[Higgins the genius]

Rotich insists on the fuel tax! The president may invoke art 115. Send all the amendments to finance bill back to N.A with memorandum. To even just discuss the memorandum, you need 236 Members.

https://citizentv.co.ke/business/fuel-tax-must-be-implemented-from-september-1-rotich-211071/

[GeeMail]

So Higgins, all that the MPs need to do is to boycott the session where the matter is debated and we have a good stalemate?

[GeeMail]

Ruto is acting prezzo. Why can't he overturn the fuel hikes and become the hero while his boss is away?

[patel]

Raila and Ruto are only chiming in for headlines I doubt they care. When is the last time Raila or Ruto fuelled their fleet using their own money? You can't live at such comfort financed by tax payers then turn around and claim to sympathize with the natives.

[hk]

Banks are just buying bonds and making a killing https://www.businessdailyafrica.com/markets/capital/Banks--investment-in-bonds-tops-Sh1trn/4259442-4753082-vrwiwv/index.html .Meanwhile private sector is being starved.

[RV Pundit]

It time gov started privatize many of it's companies and make some money from it - that will force the banks to lend or innovate - and will help defray some of the borrowings.

Banks are just buying bonds and making a killing https://www.businessdailyafrica.com/markets/capital/Banks--investment-in-bonds-tops-Sh1trn/4259442-4753082-vrwiwv/index.html .Meanwhile private sector is being starved.

[hk]

It time gov started privatize many of it's companies and make some money from it - that will force the banks to lend or innovate - and will help defray some of the borrowings.

Banks are just buying bonds and making a killing https://www.businessdailyafrica.com/markets/capital/Banks--investment-in-bonds-tops-Sh1trn/4259442-4753082-vrwiwv/index.html .Meanwhile private sector is being starved.

Yes government should sell its shareholding in all the companies that it has equity. That and further deregulation and  liberalization in all sectors. Also this will reduce crony capitalism, where Ruto calls KCB to give out loan to your friend.

[RV Pundit]

Exactly. That will mean firing Rotich and bringing in a kimunya like expert at fire-sale. It's time for gov to hire an auctioneer. Someone with expertise in equity market.

Yes government should sell its shareholding in all the companies that it has equity. That and further deregulation and  liberalization in all sectors. Also this will reduce crony capitalism, where Ruto calls KCB to give out loan to your friend.

[gout]

These banks will be hit hard! I expect to see Mwangi crying just the same way Kiboro is now crying after several of telling us how peace was important for the economy!! While Kenyatta's are lending through Mshwari directly to Kenyans, these banks believe governments never get broke.  Who thought NMG would be junk in months after government refusal to pay for PR and NIS reporting is good for 'buyers' who have ready billions - same way for dead Mumias and dying Portland Cement.

Mzungu can't be this cocky for nothing but with definition and GDP rebasing option we are cruising.

https://www.businessdailyafrica.com/news/Kenya-warned-against-removing-petroleum-tax/539546-4755584-kwm550/index.html

[hk]

Rotich wont renew IMF standby insurance loan https://www.businessdailyafrica.com/news/Kenya-allows-IMF-cushion-to-sink/539546-4757934-n9i8qvz/index.html This allows him to shelf the fuel VAT. This is ostensibly being done to give political cover. The other day he was vehemently against shelving VAT on fuel but now he's willing to hold on implementation. This is going to test strength of the shilling and forex reserves. Its likely shilling will weaken which will mean price of fuel will still go up. Rotich is also staring at 71b addition deficit if he doesn't vat fuel. I'll bet the shilling will weaken and it has already started https://www.bloomberg.com/quote/USDKES:CUR

[patel]

catch 22....I think we would have been better off paying this VAT than letting the shilling slide. For those who are for completing the journey with Uhuru tighten your seat belts

Rotich wont renew IMF standby insurance loan https://www.businessdailyafrica.com/news/Kenya-allows-IMF-cushion-to-sink/539546-4757934-n9i8qvz/index.html This allows him to shelf the fuel VAT. This is ostensibly being done to give political cover. The other day he was vehemently against shelving VAT on fuel but now he's willing to hold on implementation. This is going to test strength of the shilling and forex reserves. Its likely shilling will weaken which will mean price of fuel will still go up. Rotich is also staring at 71b addition deficit if he doesn't vat fuel. I'll bet the shilling will weaken and it has already started https://www.bloomberg.com/quote/USDKES:CUR

[Georgesoros]

catch 22....I think we would have been better off paying this VAT than letting the shilling slide. For those who are for completing the journey with Uhuru tighten your seat belts

Rotich wont renew IMF standby insurance loan https://www.businessdailyafrica.com/news/Kenya-allows-IMF-cushion-to-sink/539546-4757934-n9i8qvz/index.html This allows him to shelf the fuel VAT. This is ostensibly being done to give political cover. The other day he was vehemently against shelving VAT on fuel but now he's willing to hold on implementation. This is going to test strength of the shilling and forex reserves. Its likely shilling will weaken which will mean price of fuel will still go up. Rotich is also staring at 71b addition deficit if he doesn't vat fuel. I'll bet the shilling will weaken and it has already started https://www.bloomberg.com/quote/USDKES:CUR

Either way prices will go up. Shilling weakens prices go up. VAT implemented prices go up. I'd rather he had taken a more pragmatic approach and let VAT in. At least it will not be as severe as letting the currency slide. Even better is cut govt spending.

[RV Pundit]

Good news. Look like Gov will defy IMF. I had rather we raise the whole VAT from 16% back to 18% - rather than lording taxes on already over-taxed product like fuel. We don't need IMF cushion - when we have double the forex we need to cushion ourselves. The best strategy is to exit IMF program quietly so we don't alarm the forex markets. That is the only challenge I see. To guard against the usual negativos.

[GeeMail]

MPs are asking for another moratorium on these IMF animals for another 2 years. Rotich is very likely to agree. The animals will be let loose again just before 2022.

[hk]

Good news. Look like Gov will defy IMF. I had rather we raise the whole VAT from 16% back to 18% - rather than lording taxes on already over-taxed product like fuel. We don't need IMF cushion - when we have double the forex we need to cushion ourselves. The best strategy is to exit IMF program quietly so we don't alarm the forex markets. That is the only challenge I see. To guard against the usual negativos.

This is where rubber meets the road. We shall see whether kenya needs IMF standby insurance. Given already Shilling is weakening which btw will force CBK to come to market tomorrow to buy shilling to shore up KES depleting that vaunted forex reserve. I am holding on to my USD and exchaning KES for USD as a hedge. Pundit how is treasury going to plug the 71b deficit if they wont vat fuel? And this is in addition to 29b deficit of PAYE, due to layoffs?

[MOON Ki]

This is where rubber meets the road. We shall see whether kenya needs IMF standby insurance. Given already Shilling is weakening which btw will force CBK to come to market tomorrow to buy shilling to shore up KES depleting that vaunted forex reserve. I am holding on to my USD and exchaning KES for USD as a hedge. Pundit how is treasury going to plug the 71b deficit if they wont vat fuel? And this is in addition to 29b deficit of PAYE, due to layoffs?

This.

[hk]

Uhuru rejected finance bill so vat stays https://www.businessdailyafrica.com/news/Uhuru-rejects-Finance-Bill--fuel-remains-at-same-price/539546-4758544-vej4mh/index.html . So kenya is being screwed twice. Vat on fuel and withdraw of standby insurance which has led to depreciating KES. If KES weakens to 105 the price of fuel will be about 135. The prudent thing is to slash the budget. Jubilee mentality is the bigger the budget(no matter how its financed) the better, forgetting budget size doesn't directly correlates to economic development. The budget size(especially deficits) in kenya is hampering economic development.

[RV Pundit]

We collect about 4 - 5 b dollars as vat..if we want to raise 70b more..we just need to raise vat to 17-18% from 16%.I had rather we raise vat to 18% on everything but leave fuel which is already overtaxed and would have the same systemic impact anyway.So raise vat to 18% and leave fuel alone.