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UhuruConOmics: Why Kenya might to sink into economic crisis within next 18 months

Chinese President Xi Jinping (right) welcomes his Kenyan counterpart Uhuru Kenyatta ahead of the China International Import Expo (CIIE) in Shanghai, 2018.

Economic hard times are now upon us. Blogger Ephraim Njenga in 2018 predicted that, Kenya’s economy would die a slow and painful death.

In his latest piece, Njenga now warns that the dreaded end he spoke of is not far from nigh; foreseeing the coming days as increasingly difficult economically.

“Anyone who thinks 2019 was economically tough should get checked. What lies ahead is beyond what many expect or imagine. The things we have been writing about over the last six years are crystallizing.

The financial hurricane we have been foreseeing will make a landing in the next 12-18 months if not sooner. Many of us have already experienced the tightening economic noose.

This is a tale that needs no telling. I wish I could be the bearer of good news. I however would rather be a prophet of doom than a false prophet who shouts peace in times of war.

Expect debt restructuring and bailouts. This is because we have maxed out on borrowing and taxation capacity. Interest expense on public debt is expected to cross the Ksh. 400 billion mark this financial year. This is obviously unsustainable.

This will mean less government spending which will result in deeper money circulation concerns. The government will struggle to meet even basic expenditure such as salaries and routine supplies.

Bearing this situation in mind we would require huge growth in revenues to offset the adverse effects of high debt servicing costs. This is impossible in a weak economy which continues to falter. This is how debt restructuring and bailouts will become necessary.

Any further borrowing past the KShs 6 trillion mark will be akin to committing economic suicide. Besides, the removal of interest rate caps means the era of government borrowing at cheap rates is over.

Thus any extra borrowing will not only sink the country deeper but also faster. We have borrowed too much in the last seven years and done so little with the borrowed funds that a fiscal crisis is inescapable.

The money has gone into vendor driven, cost inflated, economically unproductive projects many bordering on anarchy and political adventurism.

Part of the money has been looted outright and the rest extinguished in reckless and illegal recurrent spending. No country can get away with such mistakes.

Those who think we are fear mongering pessimists will soon have their answers. The rebuke will be swift, strong and stinging.

As has been my signature conclusion over the years I continue to urge for preparedness at a personal level. Every time we have posted on this grim fiscal situation we have always hoped that someone in charge will take note and change course.

On the contrary, the government remains horrendously stubborn, out of touch and steeped in denial. Any attempt at changing things has come in the form of half measures and worse policy blunders.

They keep shouting about investing in infrastructure. They will soon know that infrastructure is not edible.

I am surprised that those who have ruined the country over the past decade are planning to run for office instead of running to prison.”


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