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ephraimnjegafans Profile picture
@ephraimnjegafan
Apr 28 • 11 tweets • 2 min read Twitter logo Read on Twitter
IF YOU HAVE NEVER UNDERSTOOD THE GOVERNMENT'S FISCAL CRISIS, HERE IS YOUR LAST CHANCE TO GET IT:

THREAD 🧵
Imagine a Mr. Kauka and his wife whose combined salary is KSh 210,000 per month after tax. He also earns KSh 9,000 monthly from his investments.
Mr Kauka has debts totaling KSh 9.2 million. His debts are rising fast as his monthly spending far exceeds his income.
He needs KSh 140,000 per month to service the debt (principal + interest). His other monthly spending include;
KSh 30,000 on housing (rent, gas, water, electricity, garbage)
KSh 25,000 on food
KSh 15,000 on shopping
KSh 25,000 on school fees for his four kids,
KSh 8,000 transport,
KSh 7,000 for house help
KSh 4,000 airtime/internet/TV subscription
KSh 5,000 entertainment/social issues
KSh 8,000 for other recurrent monthly expenses.
He also spends KSh 13,000 on pension

Further, he spends KSh 40,000 monthly on non-recurrent items/assets such as clothes, shoes, utensils, furniture, phone, investments etc.
Mr Kauka and his wife support many relatives upcountry. So every month he sends them KSh 40,000. Therefore his total monthly budget is KSh 360,000.
Out of the KSh 140,000 he needs to service his debt, KSh 70,000 is for interest and KSh 70,000 is for the principal. To survive the tough situation, our guy has been paying the interest from his salary and the principal by borrowing.
He has also been borrowing to meet the rest of his budget.

Now his lenders have gotten wind of his dire financial situation and have refused to lend him any more.
As a result, the guy now has to pay the entire KSh 140,000 for the debt from his salary. This amount is deducted automatically by the bank. So he has no control about that.

This leaves the guy with a balance of KSh 79,000 in his account after servicing the debt.
After spending this balance, he still has KSh 141,000 of unfunded monthly spending. If he continues to borrow, he will end up spending 100% of his income on debt servicing. What can this guy do to get out of this tight situation?

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More from @ephraimnjegafan

ephraimnjegafans Profile picture
Apr 28
My attention has been drawn to an interview Jimmy Wanjigi did with @SpiceFMKE 's Situation Room show. I must applaud Jimmy for the initiative he has taken to address this topic of public debt and its negative impact on the economy. Not many billionaires would take such risks.
🧵
However, some of the things Jimmy is saying are not correct and this show could end up misinforming Kenyans. Jimmy is right that the country has been borrowing for recurrent spending. He is also right that we have exhausted borrowing and taxation capacity.
When Jimmy says that the debt we owe is not legal the basis of his argument is not correct. All the borrowing we have done has been approved by parliament through the original budgets and supplementary budgets.
Read 14 tweets
ephraimnjegafans Profile picture
Apr 28
So many people nowadays ask about how we can get out of the current fiscal mess. Some people feel like there is no way out other than a doomsday economic meltdown. The truth is as late as we are, we can still evade an economic catastrophe.
🧵
The problem is that the current government just like the previous one continues to underestimate the problem. They think that the situation can just disappear on its own. This wishful thinking wouldn't help us in any way.
I am very worried about the budget the government is coming up with for the next financial year. It doesn't make any sense to budget on a business as usual basis during an economic crisis.
Read 4 tweets
ephraimnjegafans Profile picture
Apr 28
We have dithered too long to deal with these con-preachers and biblepreneurs. Most of the TV channels operated by these people should be closed.
THREAD 🧵
They are just tools for indoctrination, brainwashing, extortion and radicalisation of the masses especially the poor ones. These people deserve the protection of the State.
I wonder why the so called mighty prophet is still roaming freely. This man claims to heal all diseases. Sometime he sends people around in loudspeakers inviting the sick to his crusades where he falsely claims that he will heal cancers, HIV and all manner of diseases.
Read 10 tweets
ephraimnjegafans Profile picture
Apr 27
This chart shows how the government spent cash in the financial year ending 30th June 2022. As we have always insisted, the government has been using borrowed money for recurrent spending. This was never going to be sustainable as we have warned many times in the past.
THREAD 🧵 Image
The recurrent spending for national government adds up to KSh 2.1 trillion. If you add the recurrent spending for county governments you get almost KSh 2.4 trillion worth of recurrent spending against revenues of KSh 2.2 trillion including grants.
The fiscal situation the government finds itself in requires miracles to navigate. If the government cannot refinance its debt, soon it will be spending 70% of its revenues on debt servicing.
Read 4 tweets
ephraimnjegafans Profile picture
Apr 23
WHAT DEDOLLARISATION PORTENDS FOR THE WORLD ECONOMY AND THE KENYA SHILLING.

Some people have been asking me about the latest move by some countries to move towards ditching the US dollars in their global trade. 🧵
The desire by the BRICS countries to trade in their own currencies or even create their own currency would certainly be a gamechanger.
There is no requirement for countries to trade in US dollars. Over the years however, the dollar has become the dominant currency of global trade. It has become the worlds reserve currency. Its wide acceptability makes it convenient for use in global trade.
Read 13 tweets
ephraimnjegafans Profile picture
Apr 22
If you want to know that this government means no good for the economy, just look at the appointments being made to parastatals. When Kibaki took over power, he appointed very competent people to parastatals.
THREAD 🧵
Soon after, parastatals which were half dead or dead roared back to life. Instead of lining up for bailouts from the Treasury, they were lining up with dividend cheques.
But look at the people being appointed to parastatals these days. Most are failed politicians with no record of any outstanding private sector leadership. Clearly, these posts are being used as a tool for political reward.
Read 5 tweets

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