|Wednesday 16th of October 2019
Russia calls Turkey's invasion of north Syria 'unacceptable' @FinancialTimes
Law & Politics
Russia has said Turkey’s military assault on north-eastern Syria is
“unacceptable”, heaping pressure on Ankara as Moscow seeks to
capitalise on a US withdrawal from the region to help Syrian president
Bashar al-Assad reassert control.
Alexander Lavrentiev, President Vladimir Putin’s special envoy for
Syria, told reporters that the offensive launched last week by Turkey
against Kurdish forces in the country’s north-east had not been agreed
with Russia, which has emerged as the most influential foreign power
In the harshest comments yet from a Russian official, Mr Lavrentiev
said Moscow had “always believed that any military operation in Syrian
territory is unacceptable”.
He said the security of the Turkish-Syrian border “should be ensured .
. . by way of deploying government forces along the entire border” — a
suggestion that directly conflicts with Ankara’s plan to control a
32km-deep stretch of the country’s north-east.
The warning from Moscow came two days after Kurdish forces struck an
emergency deal with the Syrian regime in order to ward off a Turkish
assault against them. That pact has seen Mr Assad, backed by Moscow,
re-establish a military presence in several northern towns that had
been controlled by US-backed Kurdish forces under the Syrian
Democratic Forces umbrella.
Turkey’s president Recep Tayyip Erdogan insisted on Tuesday that
Ankara was proceeding with its plan to assert control over a 480km
stretch of the border from the Syrian town of Manbij, east of the
Euphrates river, to the Iraqi border. He vowed to secure the region
“within a short time”.
But the strong words from Russia, which has become an important
partner for Turkey in Syria, served as a reminder of the constraints
likely to be imposed by other foreign powers. They came less than 24
hours after President Donald Trump also set out his own red lines on
the Turkish incursion and announced US sanctions on Ankara.
Sinan Ulgen, chairman of the Istanbul-based think-tank Edam, said
that, from a military perspective, Mr Erdogan could control the whole
border region if he wanted to. But he added: “The obstacle is of a
more political nature, about what happens if he decides to do it.”
Kerim Has, a Moscow-based analyst of Russia-Turkish relations, said he
believed that Mr Erdogan had hoped to gain “much more territory” after
launching his offensive last week but had been boxed in by the rapidly
shifting dynamics and the demands of Washington and Moscow.
“Ankara, in my opinion, doesn’t have any choice other than reaching a
deal with Russia and the US,” he said.
Mark Esper, US defence secretary, said on Tuesday that US troops were
retreating partially because they were “at risk of being engulfed in a
broader conflict”, underscoring fears that international powers could
be dragged into direct confrontation in the chaotic north-east Syrian
Despite a pledge by Mr Erdogan to send Turkish-backed Syrian rebel
groups into Manbij, the Syrian army moved into the border town on
Tuesday, filling a vacuum left by US forces whose bases there had been
part of an effort to assuage Turkey’s security concerns.
Russian military police are now patrolling between Turkish forces and
Syrian troops in the Manbij district, Russia’s defence ministry said.
Mr Lavrentiev said Moscow would work to prevent a direct clash between
Turkish and Syrian troops, adding that “no one wants this kind of
clash to happen”.
Mr Lavrentiev also revealed that “real time” negotiations were taking
place between the Turkish and Syrian defence and foreign ministries
and their intelligence services. “A dialogue between Turkey and Syria
is taking place, it is taking place continuously,” he said in remarks
published by state-run news agencies.
At least 160,000 people have fled a week-long Turkish military advance
into north-eastern Syria, launched by Mr Erdogan against Syrian
Kurdish forces linked to Kurdish militants who have waged an
insurgency inside Turkey for four decades.
The Kurdish People’s Protection Units (YPG) form the backbone of the
SDF, trained and armed by a US-led coalition to combat Isis jihadis
who had conquered swaths of north-east Syria. But Mr Trump decided to
get US troops out of the path of Turkey’s army early last week, in
effect ending US protection of its Kurdish allies and the
semi-autonomous region the Kurds had carved out in north-east Syria.
Battered by Turkish assault, which the SDF says has killed 75 people,
the Kurds turned to the Syrian regime in Damascus, via Moscow, to
blunt Ankara’s attack. Kamal Akif, spokesperson for the SDF’s foreign
affairs department, confirmed that the agreement pertains only to
military arrangements thus far.
However, Mr Akif conceded that a broader political settlement could
come next, as the Assad regime solidifies its authority over a country
fractured by eight years of civil war.
Russia said on Tuesday that its military units were patrolling territory in northern Syria between Syrian and Turkish forces after the American withdrawal from the area @nytimes
Law & Politics
Russia said on Tuesday that its military units were patrolling
territory in northern Syria between Syrian and Turkish forces after
the American withdrawal from the area, underscoring the sudden loss of
United States influence in the area and illustrating how the power
balance in the region has shifted rapidly in the past week.
The announcement that Russian forces were now patrolling an area where
the United States had until Monday maintained two military bases
appeared to signal that Moscow was moving to fill a security void left
by the withdrawal of both the American military and its partners in an
international counterterrorism mission.
Videos circulating on social media appeared to show a Russian-speaking
man filming himself walking around a recently evacuated United States
military base in northern Syria.
The Russian Defense Ministry said in a statement that its military
police, which had already established a presence in other parts of
Syria, were patrolling “the northwestern borders of Manbij district
along the line of contact of the Syrian Arab Republic military and the
It added that its troops were coordinating “with the Turkish side” and
that “the Syrian government army has taken full control of the city of
Manbij and nearby populated areas.”
The developments on Tuesday came as a spokesman for the United
States-led coalition said on Twitter that its forces, which include
French and British soldiers, had left the formerly Kurdish-held town
of Manbij. “Coalition forces are executing a deliberate withdrawal
from northeast Syria,” Col Myles B. Caggins wrote. “We are out of
Turkish and Syrian troops are racing to control large parts of
northern Syria that were run by an autonomous Syrian Kurdish
government until a Turkish-led invasion began last Wednesday.
On Tuesday, Syrian government troops were deployed inside the northern
city of Manbij, a Syrian state broadcaster said, as Turkish-led forces
advanced in the countryside outside the city. Elsewhere, Kurdish-led
fighters attempted to retake the strategic Syrian border town of Ras
al-Ain from Turkish-led forces.
Heavy fire from machine guns could be heard to the south and southwest
of Ras al-Ain and from the Turkish border town of Ceylanpinar, which
is less than a mile from the fighting. Turkish artillery pounded an
eastern suburb of the Syrian settlement midmorning, raising clouds of
smoke above low farmhouses and pistachio groves.
Since the Kurdish authorities asked the government of President Bashar
al-Assad for assistance, thousands of Syrian Army troops have flooded
into northern Syria for the first time since the government lost
control of the region several years ago.
But Syrian government troops have stayed clear of the border region
near Ras al-Ain, where Kurdish troops fight on alone. Instead,
government forces have deployed to other strategic positions, such as
the western cities of Manbij, to help alleviate pressure on Kurdish
fighters on the front line.
The last-minute alliance comes at great cost to the Kurdish
authorities, who are effectively giving up self-rule.
This Russian Insertion started in October 2015
OCT 15 :: Putin is a GeoPolitical GrandMaster
Law & Politics
Let us return to UNGA, where Putin set out his stall and I quote: ‘’I
cannot help asking those who have caused the situation, do you realise
now what you’ve done?’’
With hundreds of thousands of refugees entering Europe, his question
was a sharp one.
Within 24 hours of delivering that speech, Russia instructed that the
US should vacate Syrian Air Space. This message was not delivered to
Ashton Carter by his Russian counterpart Shoigu.
It was delivered to the US Embassy in Baghdad. And pretty soon after
that message was delivered, Russia began its intervention on the side
of President Bashar Assad of Syria.
You could hear the squealing start immediately from Ankara to Riyadh,
from the GCC to Washington. All these capitals have assets on the
ground in Syria, and what is clear is that Russia is not making a
distinction between IS or the ‘’moderate opposition fighting Assad’’
[which really means ‘’our’’ terrorists].
Lavrov said: “If it looks like a terrorist, if it acts like a
terrorist, if it walks like a terrorist, if it fights like a
terrorist, it’s a terrorist, right?”
Putin fancies himself the fly-catcher and syria the fly-trap. The
speed of execution confirms that Russia is once again a geopolitical
actor that will have to be considered. It is a breath-taking rebound.
US hits Turkish officials with sanctions over Syria offensive @FinancialTimes
Law & Politics
Donald Trump moved on Monday to punish Turkey for its military advance
into Syria, imposing sanctions on several Turkish ministers and
departments and saying he would double tariffs on the country’s steel
exports to 50 per cent.
The US president has attracted sharp criticism from fellow
Republicans, Democrats and US allies after making an abrupt shift in
US foreign policy this month by consenting to a Turkish military
incursion in north-east Syria against US-backed Kurdish militias who
have been instrumental in defeating the jihadi group Isis.
Steven Mnuchin, US Treasury secretary, said on Monday evening that Mr
Trump had signed an executive order, effective immediately, imposing
sanctions on Turkey’s defence, energy and interior ministers, as well
as the Turkish government’s defence and energy departments.
Speaking outside the White House, Mr Mnuchin said “secondary
sanctions” would apply to financial institutions that carry out
transactions for the sanctioned individuals and departments.
The measures were less harsh than many investors in Turkish assets
feared. The lira was up more than 1 per cent against the dollar at
9.50am local time on Tuesday.
Piotr Matys, an emerging markets currency strategist at Rabobank, said
there was “relief” in the markets that the US opted for “relatively
Mr Mnuchin was joined outside the White House by Mike Pence, US
vice-president, who said the sanctions were intended to bring about a
ceasefire in the region, and that he and national security adviser
Robert O’Brien would head to Turkey soon to begin talks with
“The president’s objective here is very clear: that the sanctions that
were announced today will continue and will worsen unless and until
Turkey embraces an immediate ceasefire, stops the violence and agrees
to negotiate a long-term settlement of the issues along the border
between Turkey and Syria,” Mr Pence said.
The vice-president said Mr Trump had spoken directly with Turkey’s
president, Recep Tayyip Erdogan, who he said had given the US a “firm
commitment” not to attack the totemic Kurdish-majority town of Kobani,
which in 2015 fended off an attack by Isis jihadis.
Mr Trump signalled his intention to impose sanctions on Monday
afternoon in a statement on Twitter in which he also said he would
increase tariffs on steel imported from Turkey to the US to 50 per
cent and halt negotiations over “a $100bn trade deal” between the two
countries. The US had halved tariffs on Turkish steel in May to 25 per
“The United States will aggressively use economic sanctions to target
those who enable, facilitate and finance these heinous acts in Syria,”
said Mr Trump. “I am fully prepared to swiftly destroy Turkey’s
economy if Turkish leaders continue down this dangerous and
In announcing the sanctions, Mr Mnuchin said licences would remain in
place to allow the UN and other non-governmental organisations, as
well as the US government, to continue to operate in Turkey.
He said the country would be able to continue to buy fuel under the
sanctions regime, adding: “We are not looking to shut down the energy
for the people of Turkey.”
Democratic leaders in the Senate swiftly rejected Monday’s
announcement by Mr Trump, saying: “Strong sanctions, while good and
justified, will not be sufficient.”
The senators called on Republicans to join them in “passing a
resolution making clear that both parties are demanding the
president’s decision be reversed”.
Nancy Pelosi, Speaker of the House of Representatives, said:
“President Trump has unleashed an escalation of chaos and insecurity
in Syria. His announcement of a package of sanctions against Turkey
falls very short of reversing that humanitarian disaster.”
The measures appeared to satisfy Senator Lindsey Graham, who had led
Republican calls to punish Turkey for its military assault. He said he
“strongly” supported the measures. “Until there is a ceasefire and an
end to the bloodshed, sanctions must continue and increase over time,”
Before the announcement, Mr Erdogan had said sanctions would not make
him change course in Syria, warning: “Those who think they can make
Turkey turn back with these threats are gravely mistaken.”
Mr Trump said on Monday that a “small footprint” of US forces would
remain in At Tanf, a military base in southern Syria, to “continue to
disrupt remnants of Isis”.
Mitch McConnell, the Republican Senate majority leader who has
historically backed the president, said on Monday that he was “gravely
concerned by recent events in Syria and by our nation’s apparent
response thus far”.
China's big brother is watching your every move @asiatimesonline
Law & Politics
Hangzhou Hikvision Digital Technology high-tech group is operating in
more than 100 countries
In the UK alone, Hikvision has an estimated 1.3 million security
cameras. This, in turn, has raised concerns among British MPs after
the company was accused of working with Chinese security forces in the
world’s second-largest economy.
A letter released and signed by nine politicians in May stated:
“We share the concerns raised about the role of Hikvision in the UK.
Hikvision has been used in Tibet to develop an intrusive police and
security apparatus. The system uses facial recognition technology
which can distinguish minorities from ‘ethnic’ Han Chinese
populations. The sophistication of this technology and its sinister
use is a serious cause for concern when considering Tibetans and
Uighurs’ safety and security.”
Last week, the group was placed on a blacklist by the US Department of
Commerce along with 27 Chinese businesses, including cutting-edge
companies in artificial intelligence research, Megvii Technology and
An investor prospectus made it clear that the “controlling
shareholder” would “continue to be in a position to exert significant
influence over our business,” IPVM reported in 2016.
State-backed funding and government contracts have turned Hikvision
into the ultimate eyeball on the wall. Nearly 30% of its 50 billion
yuan ($7.12 billion) revenue is generated overseas.
“The three largest vendors of Hikvision, Dahua and Axis Communications
… have largely grown through organic means. The rate at which they
have done this has been impressive. None of these companies were among
even the 10 largest vendors in 2005 and Hikvision and Dahua didn’t
exist at the turn of the century,” a survey released by multinational
research firm IHS Markit, entitled Security Technologies Top Trends
For 2019, stated.
05-MAR-2018 :: China has unveiled a Digital Panopticon in Xinjiang
Law & Politics
Dissent is measured and snuffed out very quickly in China. China has
unveiled a Digital Panopticon in Xinjiang where a combination of data
from video surveillance, face and license plate recognition, mobile
device locations, and official records to identify targets for
detention [CDT]. Xinjiang is surely a Precursor for how the CCCP will
manage dissent. The actions in Xinjiang are part of the regional
authorities’ ongoing “Strike-Hard” campaign, and of President Xi’s
“stability maintenance” and “enduring peace” drive in the region.
13-AUG-2019 :: The most important currency to watch right now is the USDCNH
China has exerted the power of pull over a vast swathe of the world
over the last two decades. We can call it the China, Asia, EM and
Frontier markets feedback loop.
This feedback loop has been largely a positive one for the last two
decades. With the Yuan now in retreat [and in a precise response to
Trump], this will surely exert serious downside pressure on those
countries in the Feed- back Loop.
The Purest Proxy for the China, Asia, EM and Frontier markets feedback
loop phenomenon is the South African Rand aka the ZAR.
14-OCT-2019 :: The Canary in the Coal Mine is Zambia.
“Investors have lost faith in government promises to get spending
under control and the government has fallen out with the IMF as well,”
In Zambia, Eurobonds are trading at 60c in the $. Even the Chinese
whom many thought was Santa Claus have thrown in the Towel.
Sub Saharan Africa
@IMFNews: Zimbabwe economy to shrink 7.1% in 2019
Zimbabwe’s economy will contract by 7.1% this year, according to a new
forecast by the International Monetary Fund.
The IMF’s prediction, in its latest global economic outlook released
Tuesday, is a further downgrade from its April forecast that Zimbabwe
would see negative economic growth of -5.2%.
The new forecast is also worse than government’s own prediction of a
6.5% decline, given by Finance Minister Mthuli Ncube in a pre-budget
policy statement released on October 4.
In its latest outlook, the IMF projects the Zimbabwe economy to
recover and grow by 2.7% in 2020, a smaller recovery than the 4.6%
rebound seen by the Zimbabwe government.
This year will be the first time that Zimbabwe suffers a GDP
contraction since 2008, when the economy shrank 16.5% at the peak of a
Government workers in Zimbabwe can't afford to go to work and may be forced to stay at home after surging inflation slashed the value of their pay by more than 90%, the main public-sector union said. BBGAFRICA
Zimbabwe is grappling with galloping price increases and a plunging
currency that have spawned shortages of fuel and food.
A currency devaluation earlier this year means that state employees
who previously earned an average of $500 a month now earn $40, the
Apex Council Chairwoman Cecilia Alexander said in a statement on
As a result, some workers have become incapacitated and are having to
borrow money for transport to get to work, Alexander told reporters in
the capital, Harare.
“The council officially served government with a notification of
incapacitation,” which may mean staff won’t be able to get to work,
the council said. “We want to keep the system running, but we are
urging government to create an enabling environment.”
The government in September offered workers a 76% cost-of-living
adjustment to offset the impact of inflation, which has not been
eroded by price rises, the council said. It proposed that salaries be
adjusted in line with inflation.
Prices climbed 17.7% in September from a month earlier,the Zimbabwe
National Statistics Agency said earlier on Tuesday. While the country
has suspended the publication of annual data, that rate is estimated
in a range of 230% to 570%.
JAN-2019 :: "money is the most universal and most efficient system of mutual trust ever devised."
“Money is accordingly a system of mutual trust, and not just any
system of mutual trust: money is the most universal and most efficient
system of mutual trust ever devised.”
“Cowry shells and dollars have value only in our common imagination.
Their worth is not inherent in the chemical structure of the shells
and paper, or their colour, or their shape. In other words, money
isn’t a material reality – it is a psychological construct. It works
by converting matter into mind.”
The Point I am seeking to make is that There is a correlation between
high Inflation and revolutionary conditions, Zimbabwe is a classic
example where there are $9.3 billion of Zollars in banks compared to
$200 million in reserves, official data showed.
The Mind Game that ZANU-PF played on its citizens has evaporated in a
puff of smoke.
‘’The choice of that moment is the greatest riddle of history’’ and
also said “If the crowd disperses, goes home, does not reassemble, we
say the revolution is over.”
What is clear to me is that Zimbabwe is at a Tipping Point moment.
Record Number of Forcibly Displaced Africans Likely to Grow @AfricaACSS
With Africa's population expected to double by 2050, the rapid
increase in the number of forcibly displaced Africans of the past
decade will continue to expand unless key drivers are reversed.
There are 27 million people in Africa who have been forcibly displaced
from their homes (internally displaced, refugees, and asylum seekers).
This figure is a record and nearly triple the number of a decade ago.
If forced displacements continue to grow at the current rate of 1.5
million people per year, the cumulative total will double in 18 years.
Nearly all of Africa’s forced displacement is a result of conflict and
Nine of the ten countries with the highest levels of forced
displacement in Africa are experiencing conflict.
Of the ten African countries with the highest numbers of forcibly
displaced people, eight have authoritarian-leaning governments.
The ten African countries with the highest levels of forced
displacement create a contiguous “arc of instability.”
The five African countries with the highest number of forcibly
displaced people in proportion to their entire population are:
South Sudan (32 percent)
Central African Republic (27 percent)
Somalia (23 percent)
Eritrea (11 percent)
Sudan (7 percent)
The ten African countries with the highest number of forcibly
displaced people also have some of the fastest growing populations and
are among the least developed.
The number of people living in the Democratic Republic of the Congo
and Somalia (two of the three countries with the greatest number of
forcibly displaced people) is expected to increase by around 135
percent by 2050.
The Sahel region has the highest birth rate on the continent. The
population of Niger—one of the least developed, and most
environmentally threatened countries in the world—is expected to
triple in the next 30 years.
The rate of population growth in the 47 least-developed countries is
2.5 times the rate of the rest of the world. Thirty-two of those
countries are in sub-Saharan Africa. Half of the ten African nations
expected to have the largest populations in 2050—Angola, DRC,
Ethiopia, Sudan, and Tanzania—are among the least developed.
As Africa’s population grows, so too does the working-age (25-64
years) population—from 35 percent today to 43 percent in 2050. This
could create a “demographic dividend” that can accelerate economic
To manage its population growth, however, Africa will need to address
the sources of instability—conflict and repressive governance—that are
diverting attention and resources from needed investments.
@Mo_IbrahimFdn African Governance Report is out! #IIAG
4 out of the 5 worst-scoring countries in Education in 2017 are
fragile states, such as Chad, Libya, Central African Republic and
IIAG’s Reliability of Electricity Supply is the most strongly
correlated indicator with Education performance, and the second-best
correlated with Health performance
IIAG’s Absence of Undernourishment indicator has registered a
continental average decline since 2014 DRC, Gambia, Madagascar and
Nigeria have all deteriorated since 2014 in IIAG’s Access to
At the continental level, citizens’ dissatisfaction with Basic Health
Services has grown over the past decade
According to available data, there are 17 skilled health workers per
10,000 people in Africa, versus over 117 per 10,000 in the US
Though progress is being made, Women’s Political Representation
indicator remains the lowest scoring IIAG indicator in Gender at the
Promotion of Socio-economic Integration of Youth IIAG’s indicator has
deteriorated since 2014 Laws on Violence against Women IIAG’s
indicator score remains low, and IIAG’s Human Trafficking indicator
has experienced a large deterioration since 2014
Despite progress, unconstitutional changes in government are still a
reality on the continent, while Agenda 2063 aims at zero tolerance
In 2017, the five highest scoring countries in Education are Mauritius
(83.8), Seychelles (78.8), Kenya (72.7), Algeria (71.6) and Tunisia
(67.7). Conversely, the five countries showing the worst performance
in Education are Chad (19.8), Libya (17.0), Gabon (16.4), Central
African Republic (9.5) and Somalia (0.0).
Since 2014, compared to an African average decline of -0.3 in
Education, Gabon, Libya and Liberia have deteriorated the most (-10.4,
-8.3 and -6.5, respectively). On the contrary, Ghana, São Tomé &
Príncipe and Côte d'Ivoire have shown the largest increases (+8.5,
+6.6 and +5.3, respectively).
The five highest scoring countries in Health in 2017 are Mauritius
(93.2), Libya (89.6), Seychelles (89.2), Cabo Verde (85.6) and Rwanda
(83.3). On the other hand, the five countries scoring the worst are
Sierra Leone (51.5), Madagascar (51.1), South Sudan (42.8), Central
African Republic (38.9) and Somalia (37.4).
Since 2014, compared to an African average improvement of +2.0 in
Health, Chad, Democratic Republic of Congo and Liberia have exhibited
the most sizeable increases (+10.6, +10.2 and +10.0, respectively). In
contrast, the largest deteriorations are seen in Seychelles, Algeria
and Angola (-10.6, -7.2 and -6.8, respectively).
House sleeps on the job as country chokes on debts @dailynation @WehliyeMohamed
The subject of public debt and borrowing is emotive and for good
reasons. Payment of debt is a form of tax on all citizens of the
country — a first charge on the Consolidated Fund that takes priority
over any other expenditure in the national budget.
That is why it is important for Kenyans to know who our lenders are,
the purpose for each borrowing, its terms and conditions and
assurances that the debt can be serviced without harming the provision
of public services.
These requirements for full disclosure about the state of our public
debt is provided for in the Public Finance Management Act, 2012.
The Public Debt Management Office (PDMO) is required to make these disclosures.
The current state of our public debt is disclosed in the 2019 Annual
Debt Management Report prepared by the treasury.
Interestingly, this year’s report has more information than past
similar reports. It reveals some interesting emerging issues.
First, public debt has sharply risen over the last seven years,
reflecting an extremely loose fiscal policy stance, which probably
explains the lack of commitment by the government to an IMF/World Bank
programme that requires the country to exercise fiscal restraint.
Secondly, whereas both domestic and external debts have risen, the
composition has significantly changed.
At the start of 2012, Kenya had nearly zero external commercial debts
and the structure of external debt portfolio was more towards highly
concessional multilateral and bilateral category.
Former President Mwai Kibaki loved concessional debt. Such debts are
tied to development programmes and have no ghost or fake projects.
They attract zero or below market interest rates and are repayable
over a long period, up 40 years. Today commercial debt is at par with
the multilateral debt.
What has changed? What is so attractive about costly and risky debts
as opposed to highly concessional loans that are readily available to
The answer is simple — corruption. There is no room for economic rent
when it comes to concessional debt. Commercial loans, on the other
hand, provide a lot of room for cutting deals.
Thirdly, on the domestic debt portfolio, the ratio of Treasury bills
to Treasury bonds has moved in the wrong direction.
The mix changed from 15:85 to 35:65 — indicating that creditors hold
relatively more on Treasury bills, a sign of uncertainty on government
This portfolio has all the ingredients of high cost and risk
components — a shorter maturity means government cash flow is hard-hit
by heavy maturities every week.
What the report, however, does not show is the changing structure of
the Treasury bonds portfolio.
The duration of this portfolio has been shortening, meaning investors
have preferred short-end Treasury bonds as opposed to long dated ones
due to enhanced fiscal risk.
Lastly, the debt service to revenue ratio — the amount of revenue that
goes to paying debt — has significantly risen to 42 per cent.
Although revenues have been under-performing, projections may also
have been overly optimistic based on historical performance of revenue
Nonetheless, the cost of servicing debts has risen and not necessarily
due to the uptake of new debts but the type of debt.
Short dated commercial debts — Eurobonds and syndicated bank debts —
are costlier than multi- and bi-lateral debts and gobble up
significant amount of tax revenues that would otherwise be allocated
to finance social programmes.
Our national debt has reached an unsustainable level of 50 per cent to
gross domestic products (GDP) in net present value terms set in the
Public Finance Management (PFM) law. And we most likely hit that limit
a long time ago.
Treasury mandarins have used every creative accounting trick in the
book to keep it to within the limit.
Now that there are changes at the Treasury, the cat is finally out of
the bag. But a new debt ceiling is just an academic exercise to
regularise the current limit breach.
Parliament has already approved the 2019 Budget Policy Statement with
a fiscal deficit over the medium term to be financed through
Parliament also approved the 2019/2020 budget with a deficit of Sh635
billion, meaning the House has no choice but to approve the new debt
limit unless it wants to trigger a shut-down at both levels of
The current situation was avoidable if Parliament played its public
debt management oversight role more effectively.
How on earth, for example, did it approve a fiscal framework with
deficits in current and subsequent years when they already knew the
public debt has hit the ceiling?
So what should we do to get out of the debt trap cycle that has now
taken hold in a truly viscous manner?
First, in order to slam breaks on binge borrowing, the Treasury should
immediately implement measures to drastically reduce the fiscal
deficit to below the GDP growth level in this current financial year.
Fiscal deficit has been the key driver of our public borrowing and
this must be addressed, otherwise even the proposed debt ceiling of
Sh9 trillion will be breached within the next two years.
The Big Four agenda is ambitious, costly and contradicts the fiscal
consolidation policy stance.
It must be re-visited given the realities of the country's economic
performance and the outlook over the medium term.
There is a need to urgently review and freeze all new projects except
those already negotiated and financed through highly concessional
financing from multi and bilateral agencies during this financial
We should instead re-focus on completing current commitments, embark
on a genuine path to fiscal restraint, improve efficiency of revenue
collection through best practices rather than coercion and sustain the
recent anti-graft push.
Saving the country from an economic meltdown should now be President
Uhuru Kenyatta’s number one agenda.
Second, we need to reverse the current composition structure of public
debt to the pre-2012 portfolio structure, which was characterised by
longer duration and lower cost and risk.
The restructuring plan must have prior approval of the President or
Cabinet and should cover domestic and external public debt.
It must be executed in a transparent, well-guided and time-bound
process to avoid under-hand deals.
The Treasury should fully disclose to Parliament the savings arising
from such a debt restructuring plan and explain how the additional
fiscal space arising thereof will be utilised.
Finally, we must strengthen the capability of the Treasury. A quick
review of the management of this critical ministry shows a senior
management team comprising individuals on acting capacities.
Although the PDMO now has a substantive director-general, oversight
organs should carry out a comprehensive audit on its capability to
execute the statutory responsibility of managing the country's massive
Sh6 trillion debt.
The PDMO also lacks independence in executing its responsibilities.
Time has come to consider operational independence of PDMO as is the
case in other jurisdictions.
Finally, we now have no choice but to go back to some IMF/World Bank
supported economic and financial reform programmes for credibility of
economic and financial policy sake.
Wheels come off SGR dream as Sh35 billion loan comes due @StandardKenya
“It is not uncommon for a country to create a railway, but it is
uncommon for a railway to create a country.”
These words of British colonial administrator Sir Charles Norton
Edgecumbe Eliot on East Africa’s first railway line, the Lunatic
Express, will perhaps appear alongside Eliud Kipchoge’s feat of
completing a marathon in less than two hours in the annals of Kenya’s
But there is a new railway line running parallel to the abandoned
track - the Standard Gauge Railway (SGR).
The original idea was for the new line to reach the lakeside city of
Kisumu before slithering into Kampala, Uganda. But currently, it runs
from the coastal town of Mombasa to just as far as Nairobi (with the
completed Naivasha section yet to open).
And true to Eliot’s words, this is because it cannot create a new
country; it only appears to have succeeded in destroying an old town.
More than 100 years ago, the British government is reported to have
conscripted Africans to work on the construction of the old railway,
but today, the government of an independent Kenya is forcing its
citizens to do business with the new railway.
This is why residents of Mombasa County are incensed. The SGR is
stripping Mombasa of its economic vitality, turning it into a ghost
They would have cursed their gods if the whole thing would have been
organic; if it was the inescapable power of the free market, with
consumers freely opting for the new mode of transport.
But it is not a pendulum of consumer choice that is knocking down
Container Freight Stations (CFS) and leaving scores of Mombasa
residents without jobs, it is the hideous hand of State intervention
that is bringing the coastal town to its knees.
Traders, 95 per cent of whom had been using trucks before the
much-hyped SGR came into place, are being forced onto the SGR.
This explains why in the last few days, truck owners and drivers have
barely left the streets. They have been protesting Kenya Port
Authority’s (KPA) directive in March that every cargo destined to
Nairobi and beyond be ferried on SGR.
KPA cancelled an earlier notice that had allowed importers of nine
commodities to use CFSs of their choice.
That the Government is acting like the proverbial drowning man who
clutches at straws was evident in a recent directive by Kenya Railways
Corporation (KRC), prohibiting passengers from entering the coaches
The sheer knee-jerk reaction from the Government, the Financial
Standard has established, is the fact that the first principal payment
for the SGR loan, about Sh35 billion, is due in January next year,
according to Treasury data.
The State is desperate for cash and is hoping that the SGR can
generate money to help it supplement its depleted coffers.
The suspended Treasury Cabinet Secretary Henry Rotich said the payment
would be done bi-annually.
The Jubilee administration, which chose to ignore dissenting voices
concerning the bloated cost of the SGR, is finally coming to terms
with the brutal reality, having not figured out how it will repay the
close to Sh400 billion it borrowed from China for the colossal
Transport Cabinet Secretary James Macharia had not responded to our
queries by the time of going to press regarding the loan repayment and
the executive order that has seen truckers run out of business. KRC
Managing Director Philip Mainga also did not respond to our queris.
Even the abandoned Lunatic Express, which some derided as going
nowhere, had to spread its tentacles to the region to be viable. At
its zenith, it went through Kenya and Uganda.
In similar wisdom, mostly to prop up its Belt and Road initiative that
will ensure the Chinese economy is constantly fed with vital resources
even as it deploys its excess exports and investments, China also
wanted the SGR to be connected to Kenya, Uganda, Rwanda and South
Kenya alone has no capacity to sustain the SGR. The country’s exports
that can be transported on rail are so meagre that if they alone were
to be evacuated on the line, the job would be done in less than a
If you add this to the entire volume of imports last year eligible for
railway transportation - about 11 million tonnes - you have a traffic
of under 15 million.
Yet, a 2013 World Bank report showed that for the SGR, with an
investment of Sh325 million per kilometre, to be financially and
economically viable it had to have a carrying capacity of 60 million
tonnes and attract traffic of 55.2 million tonnes per year.
The scramble for the tiny quantity of imports is already too vicious.
The truckers, as predicted, will do just anything in their power to
beat the SGR. There is still the pipeline to transport petroleum.
A government study done early this year on the cost of using the
railway showed that the SGR was more expensive than road due to port
handling charges such as re-marshalling, storage and demurrage.
While the cost then was Sh50,000 to move a 20-foot container from the
SGR terminus in Miritini to the Inland Container Depot (ICD) in
Nairobi, costs associated with the handling and storage of cargo at
the port tend to push up this cost by more than 100 per cent, with the
effect being cargo owners paying a total of Sh140,000 ($1,420).
Cargo owners would pay truckers Sh65,000 to have a similar 20-foot
container moved from Mombasa to Nairobi. The bigger 40-foot container
costs Sh85,000 by road.
Currently, SGR’s annual running capacity is around 22 million tonnes
(although there are plans to increase it to 31 million tonnes this
year), a clear indication that the modern railway will be used to move
goods made outside and not those produced in Kenya. The SGR
desperately needs the other East African countries to survive.
But it is struggling to reach Kisumu, leave alone Kigali, Juba and
Kampala. Uganda has barely started its own. Rwanda is dithering, at
one point suggesting preference for the Tanzanian route while still
fawning over Kenya.
As a result, the Chinese are holding their horses. Despite approving
an additional Sh369 billion for the extension of the SGR from Naivasha
to Kisumu, there have been reports that China refused to release the
Although the Government downplayed reports that Kenya was denied funds
for Phase 2 of the project - saying that was not part of President
Uhuru Kenyatta’s agenda when he visited Beijing in April - the
Transport ministry has since announced plans to instead upgrade the
metre gauge into an SGR.
Moreover, after Ethiopia nearly defaulted, China has started being
mean with its billions.
Wang Wen of China Export and Credit Insurance Corporation, also known
as Sinosure, is reported to have urged Chinese developers and
financiers of projects to step up their risk management so as to avoid
the Ethiopia scenario.
He cited a major mistake in the Sh400 billion Addis Ababa-Djibouti
freight railway project that saw the Asian giant incur losses running
into Sh100 billion.
“Ethiopia’s planning capabilities are lacking, but even with the help
of Sinosure and the lending Chinese bank it was still insufficient,”
said Wen, citing underutilisation of major projects that China has
deployed, especially railways.
KRC appears to be holding back on how much the new railway has been
earning, with the last update that the corporation gave KNBS being the
earnings for February this year. But the truth is that the revenue is
Over the two months, KRC said that SGR had earned a total of Sh1.2
billion, with the share of cargo being 80 per cent, Sh959 million,
while that for passenger service was Sh250 million.
But it appears to be obfuscating or downrightly inflating SGR
revenues, inviting even more controversy on a project that some
critics have already labelled a white elephant.
In the Economic Survey 2019 that was released to the public in April,
the national statistician noted that SGR had earned Sh10.3 billion in
revenues from passengers and cargo for the year to December 2018.
However, a month later, in the yet another of its reports, the Leading
Economic Indicators for January published in May, KNBS had revised the
figures. The revenues for the new railway were Sh5.7 billion over 2018
– a downward revision by nearly half.
Experts who pored over the numbers noted that a 10 per cent difference
between provisional numbers in the Economic Survey and the final
results of January 2019 was acceptable.
However, a 50 per cent decline raises suspicion over possible cooking
of data by the statistics body, experts reckoned.
The difference in the numbers reported could be due to the little
degree of control that KRC has on the revenue collection.
Currently, China Road and Bridge Corporation has control of the
revenue collection systems as well as the custody of the revenues. KRC
has in the past pushed for control of both the collection system and
the revenues realised.
China and Kenya had agreed to set up an escrow account where all the
revenues from SGR operations would be deposited and help in repaying
the loans borrowed for constructing the railway.
Assuming revenues of Sh600 million a month, the train service might
still not be making enough to cater for its operations, with expenses
over last year having been in the region of Sh1 billion per month.
KRC and the operators of SGR now face a huge task of convincing cargo
owners to use the railway after the Government withdrew a directive
compelling them to use SGR.
This will be a relief to cargo owners, who at times had been
inconvenienced, with some of the cargo meant for Mombasa ending up at
Nairobi’s Inland Container Depot.
One of the things that were supposed to boost SGR’s capacity were the
special economic zones in Naivasha, Kisumu and Mombasa, but they
remain a pipe dream thus far.
SGR is part of a proposed wider regional network for the development
of railway connecting Kenya, Uganda, Rwanda and South Sudan.
Otherwise, with Kenya alone, the SGR is pretty much a white elephant.