Definition: Toast (slang): to be doomed, ruined, or in trouble: If you’re late to work again, you’re toast!
In an ominous warning characteristic of something between a smirk, laughter and joy, that is so typical of western powers, after they have gotten their ‘prey’. The Moody rating agency has warned Kenya about crisis brought about by debt.
Moody’s is just announcing what years of lies by the Bretton Woods institutions, i.e World Bank and the International Monetary Fund (IMF) have been peddling in Kenya in order to, one, keep the masses calm amidst the ongoing economic crisis and bad governance and two, make the senile and sometimes ignorant government officials think that they are on the right path.
The right word is not senile but semi-literate.
The World Bank, in particular, has lied through the teeth that Kenya has been rising in the EASE OF DOING BUSINESS globally, but this is only true, as always for the foreigners, because even as Dr Wandia Njoya argues that, Kenya’s historical preoccupation with being an attractive destination for foreigners and their money has come at the expense of catering to the needs and aspirations of its citizens.
Just a week ago, IMF said of Kenya, “Looking at the numbers coming out of Kenya it’s fair to say that the outruns here have so far been better than what we at the IMF expected.”.
In layman terms, it sees an upward improvement in economic activities and there’s ‘good signs of recovery’.
Kenya’s record of ease of doing business is anything but.
Ease of Doing Business in Kenya. pic.twitter.com/wrwJ4kmkjl
— Sura Mbaya (@surambaya) September 2, 2020
For the rest of the dire outlook on the economy as per Moody’s Ratings Agency, read the below article from the Standard
Global ratings agency Moody’s has warned that if Kenya does not reverse its increasing debt, then it might get into a financial crisis.
The agency said it was particularly concerned about payment of interest which has been consuming a lot of tax revenue over the past five years.
Failure by the government to tame the country’s debt appetite, it said, will make it difficult for the country to absorb shocks that result from shifts in confidence by private lenders.
“If the government is unable to reverse the increase in debt we forecast over the next year and restore its fiscal strength, the sovereign’s vulnerability to shifts in private creditor sentiment could intensify and its capacity to absorb future shocks will be diminished,” said Moody’s.
The agency said, for instance, that the stock of short-term government debt — Treasury Bills — remained large at 8.7 per cent of gross domestic product (GDP) at the end of June 2020, “which leaves the sovereign vulnerable to market sentiment and a rise in its borrowing costs.”
“The establishment of Brand Kenya is just one of the more egregious examples of Kenya’s history of governments more preoccupied with pleasing foreigners than with serving its own citizens. Every time Kenyans are in distress, the main worry of the government is whether the investors will notice anything, and how soon we can cover up our human weaknesses so as not to scare them away”, Dr Wandia Njoya
It wants the government to implement a credible fiscal consolidation plan that will determine its ability to contain any rise in borrowing costs and liquidity or rollover risk.
Fiscal consolidation involves implementing policies to reduce budget deficits and accumulation of debt stock. This is achieved by either increasing the revenues or reducing expenditure to narrow the budget deficit.
“Part of the lower income tax revenue could be offset by the removal of tax exemptions and waivers,” said Moody’s, with several measures already included in the Finance Act.
Some of the measures include removal of some items from the zero-rated category of value-added tax and amendments to the excise duty on certain items.
“Over time, the elimination of additional tax waivers and exemptions could offset the tax cuts. However, we expect the majority of fiscal consolidation to come from lower spending,” said Moody’s.
For the 2020-21 financial year, the government reduced its revenue target by Sh110 billion.
However, rather than reduce expenditure due to the revenue shortfall, it decided to borrow more.
This comes at a time when the National Treasury has indicated that it plans to borrow Sh1 trillion, excluding grants from donors, which will push the country’s debt stock to Sh7.7 trillion.
Treasury said in the Budget Review Outlook Paper 2020 that before Covid-19 started wreaking havoc around the world, it had embarked on belt-tightening measures and was targeting a lower fiscal deficit.
This austerity plan was premised on strong revenue growth, reduction of non-essential spending such as hospitality, advertising and a gradual slowdown in the growth of public debt.
“However, this path was interrupted by the outbreak and rapid spread of the Covid-19 pandemic,” said Treasury in the outlook paper, which sets the stage for the government’s fiscal policies for the current financial year.
“The pandemic did not only worsen revenue performance in 2019-20 financial year, but will also affect revenue performance,” Treasury said.