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Archive for the tag “GDP”

Kenya: Monetary Policy Committee Meeting (29.05.2017)

Uganda: Civil Society Position on Tax Revenue Measures for FY 2017/18 (21.04.2017)

Rwanda 1994: Gen. Paul Kagame letter of 10. August 1994 (Confidentiel)

Report from the MoFPED shows the growing Ugandan debt by June 2016!

Again, the Ministry of Finance, Planning and Economic Development (MoFPED) dropped another report on the fiscal policies and the fiscal health of the economy in Uganda. The National Resistance Movement (NRM) have created this environment as the growing debt and growing interest payment comes with their planned debt rise. Still, the PriceWaterhouseCoopers spelled gloom earlier in the year, as this report was dropped on the MoFPED web page today. Even if the Report was spelled out in December 2016. It is if like the NRM didn’t want this to spelled out early. Since the numbers aren’t compelling of an arts piece, more issues… just take a look!

The stock of total public debt grew from US$ 7.2 billion at the end of June 2015 to US$ 8.4 billion in June 2016. This represents an increase from 30.6% of GDP to 33.8% over the two periods. The increase was largely on account of external debt, which grew from US$ 4.4 billion to US$ 5.2 billion over the period. Domestic debt increased from US$ 2.8 billion to US$ 3.2 billion” (MoFPED, P:V, 2016).

That the debt are growing quick, as the public debt grew with US$ 1.2 billion, that the percentage of GDP went up with 3,2%, the external debt rose with US$ 0.8 billion and the Domestic debt went up US$ 0.4 billion. All of these numbers show the amount of monies that the Government are adding on their debt, as the UNRA and the development projects are suspended by World Bank. So the Infrastructure development can be questioned as the growing debt, as the government must have other uses of the growing and scaled up debt. Since the transparency of the economy isn’t there and that the sanctioned bills comes from the State House. Just look at the growing interest rates as well.

Interest Payment as a percentage of GDP stood at 2.2% as at end June 2016, up from 1.9% as at June 2015. The increase is largely explained by interest payments on domestic debt, which grew from Shs 1,077 billion in FY2014/15 to 1,470 billion in FY2015/16. There was a significant increase in the weighted average interest rate of Government debt; from 5.9% to 6.5% in June 2015/16. This followed increases in the weighted interest rates for both domestic and external debt, from 13.6% to 15.3% for domestic debt and from 0.9% to 1.2% external debt. As interest rates increase, so do the debt service obligations of Government” (MoFPED, P: 4, 2016).

The difference between June 2015 and June 2016 the percentage has grown with 0.3%, the domestic interest rate grew with Shs. 0.393 billion. The Interest rate alone went up by percentage 0.6%, as the weighted interest rates went up 1.7%. The key sentence that the report wrote and I repeat: “As interest rates increase, so do the debt service obligations of Government”.

That idea isn’t only on the interest payment percentages are running higher, but as the debt goes up, the interests goes up. So the Debt Service Obligations are going up for the Government. This is a natural outcome, that the obligations for the state goes up with the amount of debt it rises. So the government can try to portray this is controlled, and to one extent it is under control. Still, the growth in this regard proves that the NRM regime are pilling up debt and increasing their debt, as well as interests. In the end this will make the state worse. Especially knowing that the energy dams have been built poorly and many of the expensive roads haven been fruitful. This is development that the growing debt is being used to…

So the NRM regime and the Ugandan government isn’t believable… the rise of debt and interests show’s the current state of affairs. Even if the percentage is after plan, the government still has to take charge and make sure they can pay back both the debt and interests. Peace.

Reference:

Ministry of Finance, Planning and Economic Development (MoFPED) – ‘DEBT SUSTAINABILITY

ANALYSIS REPORT 2015/16’

Kenya: Monetary Policy Committee Meeting (27.03.2017)

Opinion: Suddenly President Kagame doesn’t want Rwanda to be dependent on the West!

For Africa as we wait to see what unfolds and adjust, we should be learning the lesson that we should not be entirely dependent. We will wake up to the reality there are things we should be doing for ourselves. You have made it appear that your situations are perfect and you want others to emulate you. Then you are surprised by what unfolds. It is what you have been hitting us with that is coming back to bite you. I did not change the constitution. If you want to know the truth you will find it is the people who did, not me. My satisfaction lies in the truth that we have not been involved in harming our people. What we are doing is to develop our country. If we don’t take care of ourselves, no one else will. As long as Rwandans are happy, we will keep doing what needs to be done. We will be listening to what others say but we will not be distracted from what needs to be done.”

-President Paul Kagame speaks to Gerard Baker, editor in chief of the Wall Street Journal, at the closing session of Invest in Africa conference.

President Paul Kagame of Rwanda, the long lingering Executive of Rwanda has compelled his words against dependency of the West. Surely, he has had this in mind for while in his own haven, as the Rwandan government has been a donor friendly. Therefore, that he claims now to take a stand against them shows the sudden change of attitude. However, it is sudden donors and programs that have stopped coming Kagame’s way, therefore the Rwandan government have started to run a giant tab of external debt instead of donor aid grants. Like look at some quotes from companies that establish the economic output and the financial flow of nations, like Deloitte and KPMG!

Rising debt:

“According to BMI, total external debt levels in the country have been rising steadily in recent years, from 16.1% of GDP in 2010 to an estimated 30.5% of GDP in 2015. Debt levels for 2016 and total external debt are forecast to amount to 35.2% of GDP and will be composed mostly of government debt” (Deloitte, P: 4, 2016).

Failing Foreign Aid, therefore rising debt:

“The primary headwind to the Rwandan economy in the 2016-2025 period will be the impact on debt as a result of falling foreign aid. Despite prudent fiscal policies to date, increases in debt levels will follow from the fall in foreign aid, since Rwanda is now deemed fit to transition from grant-based financing to loan-based financing by the IMF” (Deloitte, P: 5,2016).  “The government has been compelled to adopt a more prudent fiscal policy stance in an attempt to reduce the country’s dependence on donor support and increase fiscal autonomy. Recent external headwinds have encouraged the government to ease demand for imports by reassessing its infrastructure investment programme. This will undoubtedly have a negative impact on economic growth. That being said, the benefits of lower donor dependence and improved macroeconomic stability should outweigh the costs related to lower growth over the short term. Turning to external balances, Rwanda’s wide merchandise trade deficit is expected to maintain a shortfall in the overall current account going forward” (KPMG, P: 4, 2016).

“Aid harmonization has been improved and progress continues to be registered in the implementation of the Paris and Busan commitments especially the use of national budget and procurement systems. The Bank was the 6th largest Official Development Assistance (ODA) provider to Rwanda in 2013/14, accounting for 9.4% of total ODA26. The World Bank and EU invest in agriculture and energy whereas the leading bilateral DPs focus, among other things, on human development and social protection (Annex 8a). Annex 8b summarizes the progress made in implementing selected indicators as captured by the Donor Performance Assessment Framework. Use of the sector budget support (SBS) instrument has increased the share of Bank support disbursed using country systems. Under the DPCG, the Bank actively participates in activities to enhance the implementation of EDPRS II such as the 2014/15 assessment of SWGs” (AfDB, P: 9, 2016).

So if you look at the financial policies of the republic of Rwanda, some of it is not really chosen as the donors funds that has been suspended or stopped might be for several of reasons. That might be that if they accept the funds they have to follow a spectre of policies and interferes with the power that Kagame wish to achieve. The RPF and Kagame has total control of Rwanda, the export and the import, also owns dozens of the businesses. So the Rwandan government had to switch their economy with more loans, instead of donor aid. The loans are coming in through external debt as the external donor funds and grants have dwindled.

Therefore, the excuse of suddenly wanting to be independent is more a need, than a wish. If it was a wish earlier, than the AGOA or USAID to the RPF would have stopped decades ago. That should be common knowledge of the relationship between Paul Kagame and Bill Clinton. It is not that it is positive that the Rwandan Government want’s less aid is a healthy stance. Still, the excuse isn’t eaten by me.

The reality is that the increased debt instead of donor grants will hurt the economy, as the levied interest rates and other cost will hurt the economy. It isn’t healthy to be dependent of the aid either, but the reasons now seem more to reactionary than real intent. I am sure Paul Kagame would love funds from Belgium and France to build hospitals and clinics in rural regions of Rwanda. So, suddenly the West isn’t good enough, especially when they are questioning his reasons for staying in power and not having any successors while his regime is keeping a close lid on the opposition. Therefore, the economy and independent from the world becomes more important because then he needs to less show of transparency and accountability. Peace.

Reference:

AfDB – ‘RWANDA BANK GROUP COUNTRY STRATEGY PAPER 2017 – 2021 (October, 2016).

Deloitte – ‘Rwanda Economic Outlook 2016 The Story Behind the Numbers’ (June 2016)

KPMG – ‘Economic Snapshot H2, 2016 – Rwanda’ (15.10.2016) link:

https://home.kpmg.com/content/dam/kpmg/za/pdf/2016/10/KPMG-Rwanda-2016-Snapshot.pdf

Bank of Uganda: Monetary Policy Statement for February 2017 (15.02.2016)

bou-mps-15-02-2017-p1bou-mps-15-02-2017-p2

Confidential reports stern warnings about the Italian national bank debt ratio and possible damaging scenarios when restructuring it!

italianbank

The Astellon Capital Partners report on the Italian nation debt is troublesome, as the reports are indicating troubled waters ahead for controlling the debt and repayment on the defaulted loans. This will create other higher issues than only the Greek debt and interest-rates from Brussels and Berlin. The Italian and Rome problem will cause monetary effects for all of Europe, as the debt are like his:

“1980 –1995: Debt / GDP increased by 64%, due to high interest rates levied by Bank of Italy to fight inflation and promote exchange rate stability of Lira within European Monetary System, precursor to the Eurozone” (…)”1995 –2015: Debt / GDP increased by 11%, due entirely to debt servicing costs as Italy ran a primary fiscal surplus over this period” (Astellon Capital Partners, P: 2, 2017).

The continued pressure of the Italian debt is showed with the average primary balance since 1995 have been 2, 1% and the average interest costs of the GDP have been 5, 5%. “Italy among the most fiscally sound member states in the Eurozone, yet also among the most burdened by interest costs” (Astellon Capital Partners, P: 3, 2017).

These numbers are not really positive at all, as the high interest rate by the Bank of Italy together with the rise of debt servicing that increased 11% alone in a decade. That the Italian state have the amount of costs of interests amounting to 5,5% says lots of the economic pressure on the budgets and fiscal policies within the government structures. This does not like a prosperous and strong economic situation.

The report continues with more worrying numbers that the Italian labour costs are 11% higher than rest of the EU average. Certainly also that the average productivity of the labour are 12% lower than the Eurozone average. So you got higher paid workers that work less, which also isn’t strengthening the economy.

That the Italians bank’s they have deflated badly loans that has gone from under 5% in 2005 to the running value of close to 15% in 2016. So that the European Central Bank have bought into the government debt issuance: “2014 –2019: At current government debt net issuance rates and announced QE levels, ECB will have been responsible for financing 100% of Italy’s deficits from 2014 –2019”. This is if the debt is: “Assumes €50bn annual run-rate of government net debt issuance” (Astellon Capital Partners, P: 6, 2017). That is a hefty sum when considering all the other fiscal issues that already put forward.

“Substantial increase in non-bank net purchases of Italian debt required ECB and Italian Banks acquired 88% of government debt net issuance since 2008. Over next six years non-banks will need to increase purchase activity to 7x that of past nine years” (Astellon Capital Partners, P: 7, 2017). So a nation that struggles with high paid performance with low productivity are suddenly needed to get the workforce to 7 times higher purchase activity, meaning the production and selling has to increase seven-fold if the state should have ability to sustain the defaulted debt that has increased and the debt the ECB has bought. Together with the Italian Bank gold-reserve which is lower than the stated and needed figures to be sufficient. The bank has gold-reserves by today’s value about €100bn, but by the ECB agreement need to collateralised that needs to be up to €350bn. That the report claims to be only 25%; while the assets are dwindling too and that is also worrying!

The Assets have from 2011 gone from being around 0% or none, to 2016 when the assets of the Italian bank is now in 2016 -20%. Because this have come a German proposal to avoid an new Argentine Bank collapse case. As the Italian Bank are required independent assessments of debt sustainability.

The great risks for Italy and the Italian republic are these scenarios. Like the hedge funds can buy into with high risks and yields through BTP yields during the 2016-2017. Second scenario in 2018 is that the ECB or European Central Bank will be a marginal buyer of the government bonds and buying debts. Third scenario is that the Italian Banks becoming net-sellers and therefore losing their assets with less of profits in the 2016-2017. Last scenario is unilateral re-profiling or re-domination or some form of Greek-Haircuts by 2017-2018, that means trade-offs and cutting taxes to try to revamp the economy (Astellon Capital Partners, P: 21, 2017).

With these numbers and situation, there are certain men in ECB and in Italy that is worried. The strength and sovereign nation of Italy has to find ways of restructuring the debt and assets. What is certain is that the debtors cannot take it easy on this one. The Italian debts and reserves are worrying as the debt has to restructure and the focus on how the Italian republic has to get more productivity and create more production so the taxes and debt per GDP can go down. This will be painful for the Italian state and their government institutions, together with all the debt and bad-debt that the state has to cover, because the banks cannot afford to lose all of these fiscal funds. There have to be a revolution of something if the Italian republic and its workforce are able to 7 times higher purchase activity. That will not come easy and how they will ever achieve that must be by a unicorn arriving and spinning the Fiat wheels of Torino more than ever before; even getting the world more hooked on Milan fashion design or Illy coffee. Peace.

Reference:

Astellon Capital Partners – ‘Q1 2017 Notes No. 24 – Ciao a tutti: An orderly restructuring of Italian debt’

PBO: Kenya is borrowing without all requisite policies in place (Youtube-Clip)

“The government is borrowing without proper revenue planning or policies that factor in revenue growth challenges. This, according to Parliament’s Budget Office, coupled with the growing need to finance projects, will see the level of Kenya’s debt increasing in the coming year, which is already a cause for concern for some” (Kenya NTV, 2016)

Opinion: Jubilee Government, are they fiscal responsible for their current running debt?

Kenyatta Ruto 09.08.2016

Today is a day where I have questions and they are big because when you crunch the numbers for the last three fiscal years and estimated debt ratio it’s start to be worrying. It isn’t a sweet and tender way of asking. I know, but the numbers and the citizens will have to repay the amounts of borrowed cash at one point. As the Japanese will not deliver second-hand vehicles to the hospitals forever like they did during either this or last week in Kenya; Kenyan Government shouldn’t base their budget on handouts, but on tax-monies. The budget now is worrying as the levels of budget that are borrowed as it is going directly to portfolios that are day-to-day business instead of giant infrastructure development.

Why do I say that? Because each year you can question the ratio between the debt and the development projects; like in 2013/2014 the debt we’re 330bn, but the development 224bn. That is a 100bn used on day-to-day instead of building roads to Ethiopia or planning the Standard Gauge Railway. Take look!

In the 2013/2014:

At the fiscal year ending the 25th July 2014 the budget debt we’re 330,440,692,719.35. That means there 330bn debt, which we’re 25.8% of the National Revenue. National Government budget spent on development we’re 224,355,607,699.00 or 224bn.

In the 2014/2015:

At the fiscal year ending 24th July of 2015 the budget debt we’re 400,249,353,175.10. That means there 400bn debt, which we’re 25.1% of the National Revenue. National Government spent on development we’re 270,320,838,230.00 or 270bn.

In the 2015/2016:

At the fiscal year ending the 22nd July of 2016 the budget debt we’re 683,479,898,203.50. That means there 683bn debt, which we’re 36.9% of the National Revenue. National Government spent on development we’re 333,170,357,469.90 or 333bn.

So as you see, the FY 2013/2014 isn’t the worst. FY 2014/2015 is the start of loose government spending. The Jubilee all of sudden borrow 400bn and spends 270bn. That is 130bn that is used on day-to-day business, with loaned fiscal funds instead of the ordinary tax-base that the government should be fixated on. So with the last year FY 2015/2016 the Jubilee went all out in the stratosphere and borrowed from any bank or institution possible; as the debt we’re 683bn and the development we’re 333bn. That is 350bn that are used to day-to-day business and not development. The question remain why the sudden giant loan ratio towards the last year before election and why the lack of projects to use the newly granted funds.

The fiscal responsibility seems weak and not there when a government can splash this kind of funds and use this amount of debt on day-to-day instead of big projects and infrastructure projects needed. I am sure DP William Ruto has more friends that can be sub-contractors for some Chinese infused borrowed road projects around Kisumu. But, the ability to sustainable development with the steady rise of debt is worrying. That the IMF and World Bank is saying the debt ratio is still feasible should be worrying. As the IMF and World Bank never had control of the worst years before the Greece defaulted and needed saving grace from the world around it. The worst comes to worst when the Kenyan Government starts to default and reach it’s limit they have to have a mercy on the Jubilee and the counterparts who are paying for loose fiscal behaviour. The worst comes to worst with the giant amount of added fiscal funds might give the economy a edged inflation and bank rates that weakens the Kenyan Shilling as the deficit between reality and what is really used.

You can wonder why the Jubilee wants to hedge up so much loans and government debt. When the FY 2013/2014 and FY 2014/2015 we’re the net domestic borrowing around 300bn, but by FY 2015/2016 it become 500bn. That is a jump of 200bn of Domestic Borrowing. That should also be questioned together with the ratio already in the budget. This doesn’t seem like a healthy fiscal policy. The public should question the use of the borrowed domestic and total ratio of debt. The governance levels and accountability of the funds should be asked from Opposition and also the Auditor General. The Inspectorate of Government the IGG or Ombudsman should hassle the hustling Jubilee who has gained these funds and been responsible for the allocated budget and inquired for the option for loans to development and day-to-day use.

What do you think? Peace.   

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