1. In almost every economy, the government is one of the biggest customers of the private sector for supply of goods & services. The private sector reinvests the money & this helps grow the private sector & the economy & also create sustainable employment for the citizens.
2. Since 2013, trillions of shs in development budget & recurrent expenditure has gone into briefcase cos - to well connected folks with no real businesses & who don't employ even their spousese. Their inflated profits are used to buy Mercs, real estate & expensive overseas hols
3. Add that to the fact that almost all the monies we borrowed over the last 7 years did not even come into the economy. We borrow from a Chinese bank & give the contract to a Chinese company. The money moves from one account in China to another in China.
Along with dealing the health issues, the highest urgency lies in securing the funding to businesses. The government, the central bank & the commercial banks should come together and play a key role in mitigating the long term economic damage of this health crisis!
1. Covid-19 is a health crisis that has also serious economic consequences. Many countries are dealing with the health problems but are at the same time trying to minimize the impact on the economy now & once the health issues are dealt with.
2. In the last 2 months or so, I have been involved in designing Fiscal impulse, Deferral & Liquidity/Gurantee programs meant to respond to the Covid-19 crisis. In the process, I have looked at the various programs adopted by different countries (of different sizes & capacity)
1. We face serious economic issues in 2020. It is no rocket science. All the numbers point to an unfolding debt nightmare. We need more strategic approach to macro-economic policy instead of piecemeal knee-jerk tactical interventions if we are to save the country.
2. Unless we put breaks to spening & turn the economy around quickly, there will be a downward spiral feeding on itself — an internal fiscal & financial sector crisis. Slower growth would also deepen an already worsening fiscal crisis.
3. Piecemeal reform is like a game of snakes and ladders — you go up one small ladder, and get bitten by a snake tumbling back to where you were. We need comprehensive bold reforms to catch the big ladder and on to the golden turnpike.
I see some folks saying the demonetisation of the 1000 bob has failed coz a big % of the notes have failed to return. Exactly the opposite! The main objective of the demonitisation was to force people with black money to suffer losses. The more money extinguished the better!
If all the notes were returned i.e 100 percent of the 217 billion in 1000 notes was exchanged for the new notes, it means everything has been accounted for and there was no black money out there. In other words, the black money, instead of getting extinguished, got whitened.
A lot of money not coming back to be exchanged just means the hoarders — including criminals- were too afraid to exchange their old bills for new ones because going to banks or CBK was going to expose them to scrutiny and possible prosecution.
Projected numbers are always rosy. Ignore them. Look at the ACTUALS. Treasury, in every budget, will tell Kenyans that the budget deficit is 5-6% & projected numbers will even go down further. But look at the ACTUALS. Almost hitting double digits. Disastrous! #BudgetKe2019
The deficit numbers are even worse than they look coz they do not include the PENDING BILLS. GoK budgets for a road, completes 25% of the road & the 75 % to complete that road is not budgeted for in the next FY. Why so many projects are incomplete. #BudgetKe2019
Rotich and the admin are obsessed with the revenue side during every budget. Tax Tax Tax. Yet the EXPENDITURE side keeps growing faster than the revenue side. No caps on expenditure. Look at the above report and see how expenditure is growing faster than revenues #BudgetKe2019
Jubilee Admin policies have been forced down the throat of Kenyans like my mum used to force that smelly cod liver oil down my throat. It didn't work because I used to vomit it out immediately.
Buy an SGR. Realise that no one needs it. Force importers to use it. Importers now paying more than they were paying to transport goods. How will higher costs help the economy?
Forcefully deduct money from the salaries of poor Kenyans for an affordable housing scheme that no one still knows how it would work. Forcing even those with houses to save for a house. Will the collected funds be used as a guarantee scheme, securitization or refinancing tool?
Seeing a lot of debate re IMF & whether under Kibaki IMF was also in town. Yes, under Kibaki, we had an IMF program. But the program had negligible budget support link & its terms were negotiated by a seasoned team at the Treasury led by Joseph Kinyua (captain, leader, legend)
Kibaki also loathed the idea of budget financing through World Bank & Donors. The error made by the current admin & for the current program was to link Eurobond issuance with IMF standby facility. That was a big mistake.
The @StandardKenya article is in principle correct about dangers of IMF facility non-renewal & impact on our debt situation but is too alarming on the Eurobond effect. Pricing will definitely change but no immediate meltdown as suggested.