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Posted on Friday, 11 December 2015 14:20

The Kenyans who are out of touch

Kenya faces up to myriad economic problems as the country's credit crunch bites and the government doubles its external debt ceiling. Meanwhile another bank slips into administration and well-paid Kenyan MPs seem baffled as to why there is not enough money in the government kitty to pay other civil servant salaries.

 

 Kenya's money meltdown

Having defeated the Kenyan teachers' unions and their demands for higher salaries in late September, what next for Kenya's financial overlords? Not much, hopefully, according to the World Bank. Washington's finest warn the government to cut back on its recurrent spending – salaries for the most part – as well as its development spending – infrastructure, for example. The country is in the grip of a credit crunch that is playing out across the economy. The government is already borrowing domestically at record levels. Banks are going under. Borrowing and expenditure are up, but political dialogue is down. distant relatives in Greece have recognised the tune that Kenyans are humming.

Crisis? What crisis?

Back in 2014, treasury secretary Henry Rotich, the safe pair of hands usually wheeled out on these occasions, defended the government's decision to double the external debt ceiling to KSh2.5trn ($20bn). "If we approve a lower figure, we'll have to come back and ask for more. So we thought, why not have enough until 2017?" said Rotich at the time. Why not, indeed? fast-forward to today, and higher interest rates and a falling shilling have made repayments of external debts a much heavier burden. Domestic borrowing has shot up, too, with the government projecting it will have borrowed some KSh600bn by June next year. "Talk of a liquidity crisis has been overstated," Rotich reassured colleagues during televised budget committee discussions.

The banks who couldn't

But while in public the government is singing a happy song, one can only imagine the conversations behind closed doors. On the other side of town in October, Kenya's new and austere Central Bank Governor Patrick Njoroge was placing a second bank into administration. Imperial Bank is the latest bank to go under statutory management, following the decision in August to put Dubai Bank into the authorities' care. The danger of the interbank market freezing over has skipped upwards a few notches, meaning the government has to be ready to intervene to provide liquidity if necessary... with money it does not really have.

Parallel political universes

Rotich, meanwhile, was grilled by members of parliament (MPs), who occasionally appear to be living in another universe. Why, they demanded, was the government failing to pay civil servants and disburse funds for its free-education commitments? Perhaps these MPs, among the best-paid in the world, need to look in the mirror. President Uhuru Kenyatta said recently that the top 2% of Kenyan public servants are eating up more than half the national budget. We can be relatively certain that lowly teachers are not the ones responsible for this drain on resources.

Hannibal

Hannibal

From watercooler scuttlebutt to whispers from inside the most influential African boardrooms, Hannibal gives you all the juiciest titbits from the continent's business world from atop the elephant.

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