wukan wrote:Quote: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.
Think about it that interest rates are going higher and the dollar is going lower. It means the market knows the US rates will need to go much higher to attract dollars to the US assets(Actually we may get better interest rates with our Euro-bonds than equivalent US junk bonds). If US rates get to sufficient level then the dollars hanging around will rush home. Kenya has 2 billion dollars to repay in 2024 Eurobonds. What the impact you ask-the forex reserves get depleted then currency gets devalued and kenya imports inflation
Quote: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.
Well I'm glad that you are now appreciating the risk. What if the Libor rate is at 10% in 2023
Quote: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
The pipeline is being built by Total/Tullow so whatever capital investment dollars they bring in we spend to repay Kenya's debt. There is much cheaper oil in the world than Turkana's. It's more likely oil price drops to $30-35 which makes Turkana oil unviable to commercially exploit.
Lunatic express has been here for 100+ years it's not improved our exports. It was a white elephant whose cost of repayment eventually led to the mau mau conflict. The cargo volumes in east africa will not magically go up because of SGR. The cargo volumes to satisfy SGR capacity will appear maybe in 2050. Most of Kenya's valuable exports horticulture are exported through airports not seaports.
I will answer you last queries later
Do you really believe in what you are writing here ama ni kupayuka tu?
When the feds raise the US interest rates, they STRENGTHEN the dollar not weaken it...Ai! That's why you see the current capital flight from frontier markets such as KE to the US stock exchange and as the USD gets its strength, everything sold by the dollar becomes valuable...those flowers from Naivasha, those Agoa goods, that tea (see why farmers in Kericho are rich) Now if you add oil in the mix, What are we looking at?
On libor....the 12 months libor rate of Aug 2013 when KE was signing up that loan was 0.6683, what catastrophe will cause it to get to 10 in 2023? Wouldn't that be a recipe for recession?
Now on the pipeline GOK is in a joint venture with Tullow and Toyota so yes you get to pay for that too. But on a more serious note, should Kenyan not explore the oil in Turkana because the price might go down? Really?
According to you the lunatic did nothing, so how did Londoners get tea from the eastafrican highlands?
wukan wrote:Simple wealth is the output of production. The interplay of the factors of production capital, labor, land and technology (human capital) is what turns idle resources into wealth. The road to wealth starts by providing goods and services that the population wants and is willing to pay for. The more goods and services produced the more the wealth and infrastructure to serve the economy grows.
The economy grows where there is an exchange of goods and knowledge. Urban expansion is the best way to promote the exchange of knowledge and promote the division and specialization of labor.
Government spending does not stimulate economic growth. It just redistributes the income it collects from taxes. It misallocates capital towards less productive uses. It is wasteful in expenditure e.g. 10 bob biro pen will cost the govt 150. Kenya economic history shows growth has come when govt has taken a back seat and allowed private sector generate wealth.
You are right on one thing, wealth is created by employing the factors of production, Land(includes all Natural resouses), Labor(Human capital) Capital(Includes all manmade resources) Enterprise (which brings all the previous resources together for production). Now what would you be manufacturing if you cant exploit the natural resources, produce something using cheap electricity? Transport something using the cheapest form of transportation?
When a country takes up loans for infrastructure projects that lead to conducting business cheaper the "debt" becomes leverage.
"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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