Showing posts from February, 2019

The pitfalls of economic nationalism in Tanzania

Presidents YKM of Uganda and Tanzania's JPM:  Friendship at whose cost? Tanzania is now firmly on an Economic Nationalism path in a bid to create a “fairer economy” for the country and its citizens.  Such policy involves a greater state role in the management of the economy, diminishing the role of markets. However, there are pitfalls that put the success of the path to doubt: Production of marketable goods requires money, equipment, and technical know-how including management. Without these, resource or economic nationalism is a pipe dream for, investors choose to stay away.  The Latin American pioneers in that path do not appear to have gained from the windfall of oil price increases in the early 2000s.  In Venezuela, one of the early advocates of natural resource nationalism, more than 70 percent of the population is reeling in poverty today, and the economy has virtually collapsed. Economic nationalism involves; emasculating dissent, including political oppositio

Which is the largest Economy in East Africa?

The high flyers: Kenya and Ethiopia Which is the largest economy in East Africa? Interesting question. There is two running neck on neck-Ethiopia and Kenya.  The GDP of both countries has crossed the US$86 billion mark and, at the current rates of growth, will cross the $90 billion Mark in the next 12 to 18 months… well, 10 to 16 months.  When we wrote about the epic rivalry between the two economies, we did not see the reason for the see-saw on the top perch. Now we can confidently report it. It is just a small gap in the GDP accounting periods! Is Ethiopia’s the largest economy in East Africa or is it Kenya’s? A casual glance at GDP data could place Ethiopia at the top or even place Kenya at the top.  You won’t be wrong depending on the time period. But look again: Which is the economic powerhouse in East Africa? There is a six-month hiatus in the GDP accounting periods of the two countries. Kenya accounts for its GDP during a Calendar year (January-December) while Ethio

Who gains from debt to invest: Lender, borrower or both?

Proposed Lamu Port: Megaprojects  shift the growth curve If loans disbursed in full and on time, Borrower gains, If  disbursed in tranches and delayed, lender gains. Some lenders opt for  the latter  Does borrowing for capital formation benefit the borrower or the lender? Is there a loser or is it a win-win situation?  Recent economic data gleaned from various sources suggest that it is a win-win provided the debt is disbursed “on time and in full- and invested in capital formation.”  Africa Development Bank, in its Africa Economic Outlook, 2019 provide data that supports this thesis without saying so.  However, the Outlook 2018 called on Africa to mobilize external resources to fund infrastructure development. To do this, the document called on the continent’s Planners to craft bankable projects for funding through PPPs. The Outlook 2019 says that Ethiopia’s Debt to GDP ratio stood at 61.8 percent at the end of June 2018, the end of the 2017/18 financial year. Kenya’s