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Kenya Economy Watch
Ericsson
#1601 Posted : Thursday, June 07, 2018 4:45:04 PM
Rank: Elder


Joined: 12/4/2009
Posts: 10,639
Location: NAIROBI
https://www.the-star.co....-years-revenue_c1769234

The government will use half of the revenue collected next year to pay debts.

According to proposals by the Budget and Appropriations Committee, at least Sh962.5 billion — 50 per cent of domestic revenue — will be used to pay both local and foreign debts.

The proposed 2018-2019 budget is Sh3 trillion, up from Sh2.6 trillion.

The high debt obligation has forced the government to reduce the budget deficit from 7.2 per cent to three per cent in line with the East African Community agreement.

"The general direction on fiscal consolidation is to address deficit financing to reduce the rate of accumulation of public debt, while ensuring priority programmes are ring-fenced. To achieve a lower deficit, the budget should be based on realistic revenues," committee chairman Kimani Ichung’wah said.

The proposed spending will increase the national debt, already at Sh4.57 trillion.

The national government will spend the biggest chunk of the resources. It has been allocated Sh1.68 trillion, while the 47 county governments will get Sh372.7 billion.

The Judiciary has been allocated Sh17.8 billion — Sh2.5 billion for development has been slashed. Planned expansion of county courts is likely to take a hit.

After the Supreme Court nullified Uhuru's election, many Jubilee MPs vowed they would take revenge at budget time and punish the Judiciary.

Parliament's allocation is Sh42.5 billion, while Sh962.5 billion will be set aside for the Consolidated Fund to pay government loans.

Domestic revenue will account for Sh1.92 trillion of the total budget, of which the Kenya Revenue Authority expected to collect Sh1.74 trillion from ordinary taxes and Sh179.9 billion will be from financial assistance.

With the government expected to rely on international grants totalling Sh47 billion, available revenue will rise to Sh1.97 trillion.

As President Uhuru Kenyatta intensifies the war on corruption, MPs have slashed the budget for the scandal-ridden National Youth Service budget to Sh13.8 billion — down by Sh8.25 billion. The Treasury had proposed Sh22 billion.

The cuts will affect programmes at the heart of Uhuru’s flagship projects.

The Interior ministry has also been hit hard. The proposed budget calls for a Sh600 million reduction from the national Secure Communication and Surveillance System. This means that the police departments’ plan to instal CCTV cameras across major roads and towns will be hobbled.

MPs proposed a Sh20 million cut in Harambee House's budget.

The committee recommended a 25 per cent reduction in recurrent expenditures for the Teachers Service Commission, technical education, university education, post-training and skills training. These cuts amount to a saving of Sh215.4 million.

In a major blow to disadvantaged families in vulnerable areas, the MPs proposed a Sh300 million reduction in the School Feeding Programme.

School infrastructure improvement would be limited after lawmakers deducted Sh560 million from the project.

MPs have raided the National Treasury, deducting Sh5 billion from the Pension Fund, while KRA will lose Sh828 million as MPs tighten belts to fund Jubilee’s massive budget.

In a move to control runaway government expenditures, the lawmakers want Parliament to approve any government expenditure above Sh1 billion.

"Given the large projects being initiated by the national government — with contractual agreements which Parliament only gets to know later —any contractual agreement worth more than Sh1 billion should be pre-approved by Parliament by July 1," Ichung’wah said.

In a major shift from tradition, the budget committee has recommended where the executive needs to allocate money to address problems of citizens in various counties.

In Kajiado county, the committee wants Sh15 million allocated to Kajiado East and Sh20 million to Kajiado South for water pans to contain flood water. They would be used for irrigation and livestock .

In Marsabit, Sh20 million is be allocated to each of the four constituencies to drill boreholes and build earth dams. In West Pokot, Sh100 million has been allocated for feasibility studies, design and land compensation or construction of Amparo dam.

The MPs want money set aside to to construct all-weather roads in various constituencies.

In Nairobi county, the MPs have allocated Riruta-Kawangware Road Sh60 million. In Nyamira, each of the three constituencies has been allocated Sh10 million. Migori gets Sh10-15 million.

Although Kenya aims for a budget deficit of 5.7 per cent, down from 7.2 per cent, it will be forced to finance the Sh562.7 billion deficit through borrowing.

DEBT

Total debt service is expected to reach Sh870.6 billion, including repayment of Sh194 billion in the form of principal payments for the tap sale component of the 2014 sovereign bond and two syndicated bonds.

The high domestic debt, currently at Sh2.2 trillion, is expected to mature within the year.

The committee warned that if deficit current trend continues, a lower deficit will continue to be a moving target.

If deficit spending continues the country may not achieve the EAC monetary convergence to bring the deficit down to three per cent by 2021, leading to further accumulation of debt.

While presenting budget estimates to Parliament last month, Treasury CS Henry Rotich said the government is working to reduce external debt pressures by adopting alternative financing models, like public-private partnerships.

"This reduction will strengthen our debt sustainability position. We have carefully evaluated our external and domestic debt to ensure we are in a position to service the same," Rotich said.

He also promised to strike a balance between external and domestic borrowing, targeting Sh282.5 billion and Sh276.1 billion for external and internal borrowing, respectively.

The budget committee said: "The borrowing ratio of 50 per cent for external and 50 per cent domestic borrowing as contained in the proposed 2018-19 budget deviates from initial borrowing ratio under the Medium Term Debt Management Strategy (MTDS), which proposes a ratio of 57:43 for external and internal borrowing, respectively. This implies an increasing focus on manageable domestic borrowing."

Rotich will have daunting task to explain to Kenyans how he plans to deal with ballooning public debt when he presents the budget to Parliament next Thursday.
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
tandich
#1602 Posted : Thursday, June 07, 2018 6:37:24 PM
Rank: Member


Joined: 5/6/2008
Posts: 199
Law change: Treasury courting Greece-like debt crisis



Excerpt from the article:

“The national public debt shall not exceed 50 per cent of Gross Domestic Product (GDP) in net present value terms,” indicated the legal notice 34 section 26, 1 (c). But with Treasury boxed in what it can borrow has come to the realisation that if it keeps on borrowing with the law as currently constituted, it would eventually be in contravention to the country’s regulations.

The current debt to GDP net present value stands at 49 per cent, leaving the Government with a room of one per cent, which ties their hand in future borrowing plans.

It has now gone to Parliament seeking an amendment to the said statute to replace the clause ‘public debt’ with ‘external guaranteed debt’. This measure will technically remove domestic debt from the equation.

This would in effect reduce the country’s debt to GDP ratio from 49 per cent to 25 per cent, opening the door to more borrowing.
Seles83
#1603 Posted : Friday, June 08, 2018 7:53:44 AM
Rank: Member


Joined: 11/9/2007
Posts: 288
Location: OZ
Hopefully the new round of domestic borrowing with increase the GDP growth in short-term and long-term.
More monies, more problems...
Ericsson
#1604 Posted : Sunday, June 10, 2018 8:53:04 PM
Rank: Elder


Joined: 12/4/2009
Posts: 10,639
Location: NAIROBI
Seles83 wrote:
Hopefully the new round of domestic borrowing with increase the GDP growth in short-term and long-term.


More wastage and you cant grow economy when half of ordinary revenues is going towards debt repayment
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
lochaz-index
#1605 Posted : Monday, June 11, 2018 7:52:08 AM
Rank: Veteran


Joined: 9/18/2014
Posts: 1,127
Seles83 wrote:
Hopefully the new round of domestic borrowing with increase the GDP growth in short-term and long-term.

Hoping against hope. Ever heard of crowding out effect? Government driven growth is a mirage as Ethiopia(insert any other country with the same model) is finding out.
The main purpose of the stock market is to make fools of as many people as possible.
Ericsson
#1606 Posted : Thursday, June 14, 2018 12:08:21 PM
Rank: Elder


Joined: 12/4/2009
Posts: 10,639
Location: NAIROBI
https://www.businessdail...1208-hnvm86z/index.html

GDP at Market Prices at the end of 2017 was KES 7,749.4bn.Debt to GDP ratio now at 65% and growing weekly. There's a perfect storm of rising interest rates, a probable devaluation of the shilling and higher inflation that will make today seem like heaven in hindsight.
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
Wororo
#1607 Posted : Thursday, June 14, 2018 3:47:36 PM
Rank: Member


Joined: 1/30/2011
Posts: 207
Ericsson wrote:
https://www.businessdailyafrica.com/news/Anxiety-as-Kenya-s-public-debt-load-hits-Sh5trn-mark/539546-4611208-hnvm86z/index.html

GDP at Market Prices at the end of 2017 was KES 7,749.4bn.Debt to GDP ratio now at 65% and growing weekly. There's a perfect storm of rising interest rates, a probable devaluation of the shilling and higher inflation that will make today seem like heaven in hindsight.



If devaluation of the Kenyan Shilling was to take place, how would it affect the real estate sector at large...? Who would be the losers and beneficiary...?

Is it advisable for one to purchase say a property in the current situation as opposed to after the devaluation has taken place ...
Ericsson
#1608 Posted : Monday, June 25, 2018 9:55:57 AM
Rank: Elder


Joined: 12/4/2009
Posts: 10,639
Location: NAIROBI
https://www.the-star.co....-french-agency_c1776167

Kenya yesterday pushed up its foreign loan portfolio to Sh2.54 trillion with a new Sh47 billion loan from the French Development Agency.

Visiting Director General of the French Development Agency Rémy Rioux signed the loan with the government in support of energy, water and transport projects and Kenya's public finance management.

France is Kenya's second bilateral lender.

One of the agreements was with KenGen managing director Rebecca Miano for a wind farm project in Meru county. The Sh7 billion soft loan will finance the construction of a wind farm with an installed capacity of up to 80 MW.

The Kenya Electricity Transmission Company got a Sh10.9 billion loan. Funding will include the establishment of a control centre for Ketraco, a 400/132 kV substation in Makindu, which will improve network stability and additional funding for the Nairobi Ring transmission project.

"Kenya is one of our main partners in the world. We are proud to celebrate 20 years of activities in Kenya in support of key development issues, mainly in the areas of infrastructure, climate change and private sector support,” Rioux said.

The CEO also signed a Sh14 billion loan agreement with the government for the Mwache project, which is under the Coast Water Services Board. Co-financed by the World Bank, the project intends to end chronic water shortages facing Mombasa, increasing water production capacity from 50 million litres per day to 190 million litres per day, compared to current demand of about 150 million litres.

AFD will also help Kenya Port Authority to finance the development of the port of Mombasa through a Sh11.6 billion non-sovereign direct loan.

The agreements were signed at the National Treasury in the presence of the Treasury CS Henry Rotich, his Water counterpart Simon Chelugui and Charles Keter of Energy.

Rioux also confirmed with the Kenya Airport Authority the allocation of a Sh70 million grant to improve KAA's strategic project management, infrastructure maintenance and financial modelling.

AFD will also help Kenya improve public finance management with the World Bank under GESDEK — World Bank project Programme to Strengthen Governance for Enabling Service Delivery and Public Investment in Kenya.

The project will also aim to promote the control of budgetary risks in devolution.

AFD is celebrating 20 years of presence in Kenya this year.
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
maka
#1609 Posted : Monday, June 25, 2018 11:22:46 PM
Rank: Elder


Joined: 4/22/2010
Posts: 11,522
Location: Nairobi
Ericsson wrote:
https://www.businessdailyafrica.com/news/Anxiety-as-Kenya-s-public-debt-load-hits-Sh5trn-mark/539546-4611208-hnvm86z/index.html

GDP at Market Prices at the end of 2017 was KES 7,749.4bn.Debt to GDP ratio now at 65% and growing weekly. There's a perfect storm of rising interest rates, a probable devaluation of the shilling and higher inflation that will make today seem like heaven in hindsight.


Wameambiwa lakini hawaamini...
possunt quia posse videntur
Liv
#1610 Posted : Monday, June 25, 2018 11:40:54 PM
Rank: Veteran


Joined: 11/14/2006
Posts: 1,311
maka wrote:
Ericsson wrote:
https://www.businessdailyafrica.com/news/Anxiety-as-Kenya-s-public-debt-load-hits-Sh5trn-mark/539546-4611208-hnvm86z/index.html

GDP at Market Prices at the end of 2017 was KES 7,749.4bn.Debt to GDP ratio now at 65% and growing weekly. There's a perfect storm of rising interest rates, a probable devaluation of the shilling and higher inflation that will make today seem like heaven in hindsight.


Wameambiwa lakini hawaamini...


"Rising interest rates and devaluation of the shilling" ... can someone explain dispassionately how these 2 will happen ...especially together.
wukan
#1611 Posted : Wednesday, June 27, 2018 11:42:29 AM
Rank: Veteran


Joined: 11/13/2015
Posts: 1,568
Quote:
Kenya’s gross domestic savings as a percentage of GDP fell to 10.3 per cent last year from 11.2 per cent in 2016 as the rising cost of living ate into cash set aside for a rainy day.

Latest statistics by the Treasury show that total domestic savings fell to Sh795.1 billion from Sh807 billion in 2016, even with the GDP growing by 4.9 per cent at the same time to Sh7.75 trillion.

These savings are usually a barometer of the financial well-being of the population, with times of prosperity characterised by higher savings and leaner times seeing people raid their accounts for cash.

“The high cost of living is mainly why you hardly see attractive savings rate in Kenya rather than what many conventionally tend to blame, the interest rate levels.


https://www.businessdail...33420-ih89cj/index.html

@Liv, low savings means the money to be lent out is small so the cost of that money must be high(rising interest rates). Domestic savings cannot support private sector and GoK appetite so borrow externally in dollars.Trump decides he needs dollars to fund US infrastructure so you have to compete with uncle sam by paying higher interest rates to borrow. In that situation GoK must keep raising interest rates to attract the few dollars. Eventually GoK goes broke like in 2015 you have capital flight which you will see through devaluation of the shilling. CBK must then hike rates to attract dollars back in the economy.
Ericsson
#1612 Posted : Thursday, June 28, 2018 12:07:52 PM
Rank: Elder


Joined: 12/4/2009
Posts: 10,639
Location: NAIROBI
Kenya's economy is really suffering from lack of credit to the private citizens
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
obiero
#1613 Posted : Monday, July 02, 2018 8:27:13 AM
Rank: Elder


Joined: 6/23/2009
Posts: 13,475
Location: nairobi
Equity, Coop, CBA caught up in title deed theft racket https://www.businessdail...640998-l0qry6/index.html

HF 30,000 ABP 3.49; KQ 414,100 ABP 7.92; MTN 15,750 ABP 6.45
Ericsson
#1614 Posted : Monday, July 02, 2018 8:32:43 AM
Rank: Elder


Joined: 12/4/2009
Posts: 10,639
Location: NAIROBI
[quote=obiero]Equity, Coop, CBA caught up in title deed theft racket https://www.businessdail...40998-l0qry6/index.html[/quote]

Three guys going for one lady then found themselves on the same bed
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
Angelica _ann
#1615 Posted : Monday, July 02, 2018 8:55:57 AM
Rank: Elder


Joined: 12/7/2012
Posts: 11,901
Ericsson wrote:
[quote=obiero]Equity, Coop, CBA caught up in title deed theft racket https://www.businessdail...40998-l0qry6/index.html[/quote]

Three guys going for one lady then found themselves on the same bed


Very interesting!!!
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
wukan
#1616 Posted : Monday, July 02, 2018 10:01:11 AM
Rank: Veteran


Joined: 11/13/2015
Posts: 1,568
obiero wrote:
Equity, Coop, CBA caught up in title deed theft racket https://www.businessdail...40998-l0qry6/index.html


You can never go wrong with real estate *kenyan proverbsmile
obiero
#1617 Posted : Monday, July 02, 2018 11:03:20 AM
Rank: Elder


Joined: 6/23/2009
Posts: 13,475
Location: nairobi
wukan wrote:
obiero wrote:
Equity, Coop, CBA caught up in title deed theft racket https://www.businessdail...40998-l0qry6/index.html


You can never go wrong with real estate *kenyan proverbsmile

Digitization of the land registry across all counties is our only panacea. I have lost hard cash on land and its never funny

HF 30,000 ABP 3.49; KQ 414,100 ABP 7.92; MTN 15,750 ABP 6.45
Wororo
#1618 Posted : Monday, July 02, 2018 6:09:36 PM
Rank: Member


Joined: 1/30/2011
Posts: 207
muandiwambeu
#1619 Posted : Monday, July 02, 2018 6:27:30 PM
Rank: Veteran


Joined: 8/28/2015
Posts: 1,247
wukan wrote:
obiero wrote:
Equity, Coop, CBA caught up in title deed theft racket https://www.businessdail...40998-l0qry6/index.html


You can never go wrong with real estate *kenyan proverbsmile

Worth the read.
,Behold, a sower went forth to sow;....
Angelica _ann
#1620 Posted : Monday, July 02, 2018 8:08:07 PM
Rank: Elder


Joined: 12/7/2012
Posts: 11,901
Let me leave this here ....


https://www.businessdail...asAMP-132ykdw/index.html
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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