THE IDEA THAT WE CAN DEFAULT ON OUR DEBT IS PEDESTRIAN AND SIMPLISTIC SLOGANEERING
I have seen some people advancing an argument that we can simply default on our debt as a way out of the current crisis. This is wishful thinking and simplistic argumentation.
I guess these views are driven by the perception that China is responsible for our debt problems. China at the moment only accounts for 11% of our total public debt. Even if we were to default on debt to China we would still be owing KShs 4.5 Trillion and counting.
Half of our debt is domestic debt owed to Kenyans, that is KShs 2.5 Trillion. How do you default against yourself? The entire financial system would collapse.
Is it a just argument to argue that you can borrow people’s money, waste it and then refuse to pay?
Over 30% of our external debt i.e. KShs 906 Billion is owed to foreign commercial banks. Even a hint of default would see dire consequences on the economy. The shilling would plummet making our external debt blow out of control.
We owe KShs 2.5 Trillion (USD 25 Billion) in foreign debt. A depreciation of the shilling by ten shilling to the dollar would see the debt grow by KShs 250 Billion without borrowing an extra shilling. If the shilling were to depreciate to KShs 150 per dollar our external debt would immediately rise to KShs 3.75 Trillion i.e. an extra KShs 1.25 Trillion without any borrowing.
What then would be the point or rationale of defaulting on debt only for the economy to collapse? Who would be foolish enough execute that idea?
Under international law African countries are under NO legal obligation to pay back a cent of Chinese loans. China induced African leaders through bribes/kickbacks to sign loan agreements under unfavourable terms to Afican countries but favourable inducements to African leaders.Loading...
— Ahmednasir Abdullahi SC (@ahmednasirlaw) September 11, 2018
Let us get one thing clear on the Chinese loans & why African politicians are MADLY in love.Due to legislation, American and EU companies CANNOT bribe or give 10% kickbacks when tenders are awarded. Chinese companies who are state owned give 10 to 30% bribe once tender is awarded
— Ahmednasir Abdullahi SC (@ahmednasirlaw) September 12, 2018
Am in agreement with my friend Ahmednasir Abdullahi that Kenya & all African Countries have no Legal Obligation to repay China. China Loans factor bribes for African Leaders & Mandarins . Such contracts are VOID & fall under Law doctrine of Ex turpi causa non oritur actio.
— Donald B Kipkorir (@DonaldBKipkorir) September 12, 2018
Meanwhile Jubilee’s flagship project is in trouble, the SGR has not in anyway been beneficial in the logistics of getting containers to inland East Africa;
While we were told SGR would bring efficiency and lower transportation costs it is actually causing unimaginable losses. The Business Daily reports that importers are losing KShs 70 Million daily due to congestion at the Inland Container Depot (ICD) in Nairobi. This would translate to a loss of KShs 26 Billion annually.
It is also claimed that the cost of transporting containers has not reduced under the SGR regime. The quoted SGR costs do not consider last mile transport cost from the ICD to client and return of the container to Mombasa.
While the SGR promises transporting goods from Mombasa to Nairobi in eight hours, goods are taking weeks to clear at the ICD resulting in high demurrage charges. Government agencies have reduced the process of clearing goods into a Tower of Babel.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.