Monday, 5 March 2018

AN OPEN LETTER TO THE PRESIDENT- Please Ignore IMFwiles


Thika superhighway, almost sabotaged
by the West
Dear Sir,
 My Late father once told me; "He who cannot be advised by a child does not have him." This was after I overheard him telling his wife-my mother - how he spend the whole day running from one office to the next in a bid to transfer his businesses to his wives’ names. Why was he doing all that? She asked.
Because a transport company he was a shareholder had been found liable by a court of law and ordered to pay damages! The company had long collapsed. So my father, fearing that the claimants would attach the property of the shareholders rushed to transfer his businesses to his wives’ names so that once the auctioneers come calling, they will find nothing to his name.
Now the transport company was a limited liability and from my rudimentary understanding of commercial law taught in my secondary school business class, I knew my father was not liable. I told him as much. He did not believe me neither did he ignore my advice until my brother, an accountant, confirmed my advice two days later. Hence his comment, which has stuck in my head from those days, just a few months after we buried our first president, your father.
 It is in the spirit of my father's compliment that I write to you, this lengthy letter your Excellency.
 The recent IMF mission in Kenya is said to have insisted on two things: Raise Petroleum prices through taxation and two repeal the caps interest rates.
Bujagali: M7 ignored the World Bank
I must declare, Your Excellency, that I do not trust the Bretton Woods institutions. Neither do I trust experts from these institutions. But let’s stick to the institutions: It is my considered opinion that these institutions offer advice unsuitable for Africa. This is why some Presidents have rejected such advice and had the last laugh. Also, http://eaerb.blogspot.co.ke/2012/10/oh-no-not-world-bank-again.html
read
Take the collapsed privatization of Kenya Railways. It was forced down our throats by IFC, a Bretton Woods institution. I am informed that local experts had reservations about the deal but were ignored because the higher ups wanted to look good in the eyes of these institutions.
May I remind you, Your Excellency, that back in 2010, IFC, the World Bank private sector lending arm, also withdrew from a deal to construct the Southern By-pass in Nairobi citing credibility issues on the part of one of the contractors. The withdrawal saw the collapse of the deal and the proposed construction of the Southern bypass until the Chinese stepped in.
Now we have a bypass that “has cut the travel time by three hours,” to quote you, Mr. President. The same institution, World Bank almost sabotaged the LTWP saying it could produce more power than Kenya needed. The project is expected to come on stream in August this year.  I doubt whether it will face a shortage of demand. Mr. President, I doubt whether you would be talking about the completion of SGR had you sought support from the West and particularly the Bretton Woods institutions.
 Remember Sir, that the proposal for the funding of Thika superhighway was doing rounds among the donors in the West for 17 years before AfDB, our own DFI came in. These are but just a few pointers why you should borrow a leaf from your neighbor, President Yoweri Museveni.
Sothern bypass Nairobi:
Almost sabotaged by IFC
Sir Fossil fuel l Price increases are inflationary, and a 16 percent increase in the face of rising oil Prices will spark off an inflationary spiral that would add to the fires of other inefficiencies such as drought that has seen food prices spin through the roof. Such an increase, given its permanent nature, will kill everything you have been working for because it will keep consumer prices permanently high. It will kill your “Big four agenda” because the cost of doing business will rise, confounding an already not so rosy situation.
Mr. President Sir, economic growth will bridge any tax-shortfalls in the short term. Work towards economic growth and allow Kenyans to spend their meagre income on local goods but not on oil products. 
Various credible researchers project this country’s growth to be in the upwards of five percent this year. At the current GDP level of $75 billion, a five percent growth would generate an estimated $800 million in taxes.  That compares unfavourably with the Carrot $700 million in tax-revenue attached to the IMF stick.
According to various credible researchers, the middle class in Africa is driving economic growth at home. It has enabled the continent to shrug off shocks in the world market. Kenya is no exception. Please do not kill the goose that lays the golden egg.
 The reason you sought a standby credit from IMF, was to protect the family jewels. Just like my father, it was a wise move, but unnecessary. But we are humans and we cannot accurately foretell the future. I submit that the said turbulence is well behind us and you do not need any more cover. In any case, the first standby facility, worth US$1.5 billion was never utilized.  The probability of another being utilized is remote given the current world economic circumstances.
LTWP: Almost sabotaged
 by World Bank
Your Excellency Sir, let us visit some numbers.
According to both the World Bank and AfDB, the world economy has turned the corner and is expected to grow by two percent this year. Africa is expected to do even better as the turnaround in the world Economy will raise commodity prices, thus favouring Africa. Kenya is one of those countries that are expected to drive growth in Africa.
 Credible researchers also indicate that the banking industry in Africa is the second most profitable in the world after Latin America with profitability rate of up to 24 percent.  Other banks in the world earn far less and they still exist and lend. Kenyan banks, the research says, will remain profitable at 20 percent if the interest rate caps are retained.
 I have asked why the price of money in Kenya does not respond to the general price theory and I have never been given a persuasive answer.  All I hear are vague verbosity about risk profiles. Even here, risky profiles are lower at low prices than at high prices. Your Excellency, the refusal to lend to SMEs is, but blackmail so that the industry retains is obscene profitability.
 The benefit of these difficult choices is dismal, a paltry $700 million added to our tax- kitty and a few happy extorting Kenyans in the name of profits.  The additional benefits, an insurance on BOP support should the need arise does not look necessary. Yet that big brother keeps off on matters brick and mortar- building roads, water dams, and energy generation! These are the sectors that drive economic growth and lower the Debt/GDP ratio. The projected GDP growth rate of five percent this year will generate an estimated US$800 million in taxes.
According to Leading Economic Indicators, a publication by our very own National Bureau of Statistics, at the end of December Last year, our net Foreign Exchange Reserves, were comfortable at US$5.3 billion. Our gross Forex Reserves stood close to US$ 10 billion over the same period. But foreign debt obligations took the rest. I am comfortable as things stand and I believe the country is. But of course, we expect you to keep the debts low. Perhaps, we should surcharge officials who squander public resources on travel and other avoidable expenses.
My understanding of the trends in the world economy as it stands is; we don’t even need the standby facility. We can do very well without IMF meddling in our business. Your Predecessor, Mwai Kibaki, Kept the Bretton Woods institutions at an arm’s length during his tenure. They did not like him. But we did, and that is what matters.

Please, Your Excellency, do not succumb to IMF’s wiles. Let them remain where your predecessor kept them- on the back burner. You will be in good company!

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