wukan wrote:@murchr the rate of borrowing as calculated by Cyton
The bigger issue is the borrowing pegged to the libor rate
For the SGR:
(1) $1.6 billion is at concessional interest rates of 2%
(2) $2.0 billion is at commercial interest rates: "6-month LIBOR + 360 basis points plus insurance at a rate of 6%".
Please check the historical charts for libor rate(upward trend). It's usually tied to what the Americans are doing fiscally. Trump is planning huge fiscal deficits in coming years that will necessarily push interest rates high(no there is no interest rate capping internationally). How high? A guy called Volcker who pushed rates to 20% in 1980's. Do you want estimate what libor rate will be once we start paying for SGR. You have not counted the Euro-bonds.
Let's now say Kenya borrowed to improve productivity. What are the figures that show there is more production because of the debt? Have our exports dramatically improved to get dollars to repay the debt. Nope. Is KRA growing revenue at same rate as the debt growth? Nope.
So how will Kenya pay for the debt?
1. Fiscal deficit = when a gov total expenditure exceeds revenue. In other words, what Trump is planning to do is spend more than the US gov is producing. Now you saidwukan wrote:Trump is planning huge fiscal deficits in coming years that will necessarily push interest rates high(no there is no interest rate capping internationally). How high? A guy called Volcker who pushed rates to 20% in 1980's.
The interest rates in the US are going higher and will continue to go higher infact it is expected that in 2018, the Fed(central bank of the US) will raise the interest rate 3 times. So what impact does that have on the govt - govt negotiated loans(Kenya - China? Me dont see much.
On to Libor
Quote:
What is 'LIBOR'
LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate, which some of the world’s leading banks charge each other for short-term loans. It stands for Intercontinental Exchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world. LIBOR is administered by the ICE Benchmark Administration (IBA), and is based on five currencies: U.S. dollar (USD), Euro (EUR), pound sterling (GBP), Japanese yen (JPY), and Swiss franc (CHF). The LIBOR serves seven different maturities: overnight, one week, and 1, 2, 3, 6 and 12 months. There are a total of 35 different LIBOR rates each business day. The most commonly quoted rate is the three-month U.S. dollar rate (usually referred to as the “current LIBOR rate”).
So what do we notice here. There are 7 maturities that span from overnight to 12 months. Not fixed, could be high today or lower tomorrow. Another thing that stands out is that its short-term. The chinese loan is issued on a 360 basis point above the Libor rate or 3.6% if you like. This will be 3.6% + the Libor rate in August 2023 (10-year grace period - 30year payment period). We dont know what kind of world we will be in in 2023 for the rate to be at whatever rate you imagine, it could be high or low. Time will tell.
Wukan wrote:Let's now say Kenya borrowed to improve productivity. What are the figures that show there is more production because of the debt? Have our exports dramatically improved to get dollars to repay the debt. Nope. Is KRA growing revenue at same rate as the debt growth? Nope.
If Kenya borrows to build a pipeline that transports oil from Turkana selling the oil at today's price of $65 will Kenya's exports have improved dramatically? Since you are using historical data to foresee the future, what impact did the Lunatic express have in this country 60 years after it was built? Can we transport goods cheaply without infrastructure? Can we attain that competitive edge on fear
What creates wealth?
"There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
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