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Monday 06th of January 2020
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06-JAN-2020 :: The Assassination (The Escalation of 'Shadow War') Law & Politics |
The attack on Friday authorized by U.S. President Donald Trump on
Iran’s now slain military commander Qassem Soleimani, the Iraqi
militia leader Abu Mahdi al-Muhandis and others was was a major
escalation in the “shadow war” Let me begin with a selection of
comments;
The New York Times' Rukmini Callimachi wrote the evidence suggesting
there was to be an imminent attack on American targets is “razor thin”
and that Trump was presented a menu of options for how to retaliate.
Killing Suleimani was the “far out option”
“This is more than just bloodying Iran’s nose,” Stephen Innes, chief
market strategist at AxiTrader Ltd., said in a note. “This is an
aggressive show of force and an outright provocation that could
trigger another Middle East war.”
“This is a seismic event in the region,” said Jason Bordoff, Columbia
University. “This is how U.S.-Iran tit-for-tat spirals out of control.
Iran’s response will be severe and deadly. And certainly may include
escalating attacks on energy infrastructure.”
''But a response will have to come as this is nothing short of a
declaration of war to a cornered country that has increasingly less to
lose. The risks of miscalculation are at an all-time high'' Vali Nasr.
I worked the Iran account for years at the NSC under two Presidents.
I’m honestly terrified right now that we don’t have a functioning
national security process to evaluate options and prepare for
contingencies said @Kellymagsamen
The Crisis Group's Robert Malley Told the @nytimes: “Whether
President Trump intended it or not, it is, for all practical purposes,
a declaration of war.”
The Truth is that General Soleimani along with Christian Russia and
the courageous Syrian people, KEPT 3 & 1/2 million Christians in Syria
from being slaughtered by ISIS and al Qaeda! @DrDavidDuke.
Qasem Soleimani was an iconic Figure known as The “Commander of
Hearts” and “Soleiman the Magnificent” a reader of Gabriel García
Márquez and of course the Leader of Iran’s Quds Force whom a a former
C.I.A. officer called the “most powerful operative in the Middle East
today.” @Newyorker. In an article in the New Yorker, Dexter Filkins
wrote
When Suleimani appears in public—often to speak at veterans’ events or
to meet with Khamenei—he carries himself inconspicuously and rarely
raises his voice, exhibiting a trait that Arabs call khilib, or
understated charisma. “He is so short, but he has this presence,” a
former senior Iraqi official told me. “There will be ten people in a
room, and when Suleimani walks in he doesn’t come and sit with you. He
sits over there on the other side of room, by himself, in a very quiet
way. Doesn’t speak, doesn’t comment, just sits and listens. And so of
course everyone is thinking only about him.”
“When I see the children of the martyrs, I want to smell their scent,
and I lose myself.”
It was Sulemaini who led the fight against Saddam As Revolutionary
Guard commanders, he belonged to a small fraternity formed during the
Sacred Defense, the name given to the Iran-Iraq War, which lasted from
1980 to 1988 and left as many as a million people dead. “This is the
Dasht-e-Abbas Road,” Suleimani said, pointing into the valley below.
“This area stood between us and the enemy.” Later, Suleimani and the
group stand on the banks of a creek, where he reads aloud the names of
fallen Iranian soldiers, his voice trembling with emotion. During a
break, he speaks with an interviewer, and describes the fighting in
near-mystical terms. “The battlefield is mankind’s lost paradise—the
paradise in which morality and human conduct are at their highest,” he
says. “One type of paradise that men imagine is about streams,
beautiful maidens, and lush landscape. But there is another kind of
paradise—the battlefield.”
The front, he said, was “the lost paradise of the human beings.”
The Supreme Leader, who usually reserves his highest praise for fallen
soldiers, has referred to Suleimani as “a living martyr of the
revolution.”
“In the end, he drank the sweet syrup of martyrdom.”
Qasem Soleimani resisted Saddam, he resisted the Taliban, he resisted
IS and all that is left of him is his ring. His Assassination is
''peak'' Netanyahu, Pompeo, Maryam Rajavi, Saudi ''cut off the head of
the snake'' made on the fly ''rogue''''Wag the Dog'' Foreign Policy.
We are now in an unfathomable and entirely unpredictable and non
linear Phase
Iran’s supreme leader, Ayatollah Ali Khamenei, vowed that “severe
retaliation” awaits the killers of Soleimani.
At the beginning of From Russia With Love (the movie not the book),
Kronsteenn is summoned to Blofeld’s lair to discuss the plot to steal
the super-secret ‘Lektor Decoder’ and kill Bond. Kronsteen outlines to
Blofeld his plan
Blofeld [read Trump]: Kronsteen, you are sure this plan is foolproof?
Kronsteen [read Pompeo]: Yes it is, because I have anticipated every
possible variation of counter-move.
Let me predict some counter moves.
Pompeo tweeted a Photo of about 20 Iraqis [I joke not] Iraqis — Iraqis
— dancing in the street for freedom; thankful that General Soleimani
is no more. @SecPompeo
I responded by asking Are you prepared for 1m Iraqis at the Embassy in
Baghdad next Friday @SecPompeo ?
What happens if Ayatollah Sistani issues a fatwa asking US troops to leave?
The first prediction is that the US Iraq misadventure is now over, the
only open question is around the timing.
The dogs of war is a phrase spoken by Mark Antony in Act 3, Scene 1,
line 273 of William Shakespeare's Julius Caesar: "Cry 'Havoc!,' and
let slip the dogs of war." The Iranians kept their Allies from Yemen
to Lebanon to the Eastern Province in Saudi Arabia to Bahrain and all
points in between on a leash. Trump released that leash.
Brent futures rose 3.5% on Friday, the highest since the attacks on
Saudi Arabia’s oil facilities in September.Brent crude for March
settlement rose $2.35 a barrel to $68.60, after rising as much 4.9%
earlier. West Texas Intermediate for February delivery added $1.87 to
settle at $63.05 a barrel, after advancing as much as 4.8%. The strike
also escalates an already tense three-way situation between the U.S.,
Iran and Iraq. The two Middle East countries combined pumped more than
6.7 million barrels a day of oil last month, according to data
compiled by Bloomberg, more than one-fifth of OPEC output. Exports
from both countries rely on the Strait of Hormuz, the narrow and
crucial oil and natural gas shipping choke-point.I expect Oil to come
off the boil this week because Iran will not react immediately but the
spike risk will remain sky high and the price will spike when the
counter move is made.
This is an Archduke Franz Ferdinand moment. Archduke Franz Ferdinand
Carl Ludwig Joseph Maria of Austria (18 December 1863 – 28 June 1914)
was the heir presumptive to the throne of Austria-Hungary. His
assassination in Sarajevo is considered the most immediate cause of
World War I.
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Thousands gather in Baghdad to mourn Soleimani, others killed in U.S. air strike @Reuters. Law & Politics |
Thousands of mourners gathered in Baghdad on Saturday ahead of a
funeral procession for Iran’s slain military commander Qassem
Soleimani, Iraqi militia leader Abu Mahdi al-Muhandis and others
killed in a U.S. air strike in Iraq.
Friday’s attack on Baghdad airport, authorized by U.S. President
Donald Trump, was a major escalation in a “shadow war” in the Middle
East between Iran and the United States and American allies,
principally Israel and Saudi Arabia.
Soleimani was Tehran’s most prominent military commander and the
architect of its growing influence in the Middle East. Muhandis was
the deputy commander of Iraq’s Popular Mobilisation Forces (PMF)
umbrella body of paramilitary groups.
The PMF are planning an elaborate funeral procession for both men and
the others who died, starting in Baghdad’s heavily fortified Green
Zone, moving towards the Shi’ite holy city of Kerbala and ending in
the Shi’ite holy city of Najaf.
Mourners started gathering in Baghdad’s streets in the morning ahead
of the start of the procession, waving Iraqi and militia flags in a
somber atmosphere.
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Brent futures rose 3.5% on Friday, the highest since the attacks on Saudi Arabia's oil facilities in September. Law & Politics |
The airstrike near Baghdad airport killed Qassem Soleimani, the
Iranian general who led the Revolutionary Guards’ Quds force. The U.S.
intends to send “thousands of additional” troops to the Middle East
amid rising regional tensions, CNN reported, citing an unidentified
U.S. defense official.
“This is a seismic event in the region,” said Jason Bordoff, a former
Barack Obama administration official who now works for Columbia
University. “This is how U.S.-Iran tit-for-tat spirals out of control.
Iran’s response will be severe and deadly. And certainly may include
escalating attacks on energy infrastructure.”
Brent crude for March settlement rose $2.35 a barrel to $68.60, after
rising as much 4.9% earlier. The global benchmark’s bullish options
bias was the biggest since early November while the December 2020
contract was at the widest premium to December 2021 since October
2018.
West Texas Intermediate for February delivery added $1.87 to settle at
$63.05 a barrel, after advancing as much as 4.8%.
While no oil installations or production were affected, targeting one
of Iran’s most powerful generals ratchets up tension between
Washington and Tehran, heightening fears of an armed confrontation
that could pull in other countries. Iran’s supreme leader, Ayatollah
Ali Khamenei, vowed that “severe retaliation” awaits the killers of
Soleimani.
The strike also escalates an already tense three-way situation between
the U.S., Iran and Iraq. The two Middle East countries combined pumped
more than 6.7 million barrels a day of oil last month, according to
data compiled by Bloomberg, more than one-fifth of OPEC output.
Exports from both countries rely on the Strait of Hormuz, the narrow
and crucial oil and natural gas shipping choke-point.
“This is more than just bloodying Iran’s nose,” Stephen Innes, chief
market strategist at AxiTrader Ltd., said in a note. “This is an
aggressive show of force and an outright provocation that could
trigger another Middle East war.”
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Some thoughts on #Soleimani's assassination @AliVaez Law & Politics |
first, this was not a far-fetched scenario. @khamenei_ir used to call
him the living martyr for a reason. Almost every US admin in the past
2 decades had him in their crosshairs but calculated that the risks
outweigh the potential benefits
2| But the war-mongers that this isolationist US president surrounded
himself with were very keen on this objective for a while, thinking
mistakenly that it would neuter and neutralize Iran's regional
strategy:
3| has vowed vengeance. It now has to decide whether reprisal comes in
line with Khamenei’s characteristic proportional response or not,
direct or indirect, immediate or deferred, and in Iraq or elsewhere.
4| But a response will have to come as this is nothing short of a
declaration of war to a cornered country that has increasingly less to
lose. The risks of miscalculation are at an all-time high. Most of our
Trigger List flashpoints are now blinking red:
5| Tehran might calculate that a proportional response might not
invite a U.S. counter-attack, or it might deem a disproportionate
response a deterrence against further escalation by a U.S. president
who says he is averse to Middle Eastern quagmires.
7| The US might have to counter-attack depending on what Iran does,
which could trigger an escalatory cycle that could easily spiral out
of control as we have been warning for months now:
10| Also 2) Killing Muhandis and so blatantly undermining Iraqi
sovereignty again & again have rendered defending US presence and
military bases in Iraq an impossible task for Iraqi security forces. A
humiliating departure for the US from Iraq now seems inevitable.
11| As for 3) it's now almost guaranteed that the Iranian parliament
will fall into the hands of the most hardline and militant elements
within Iran. So in the words of @valinasr,
@realDonaldTrump seems to have managed to get regime change in Iran
but not the kind that he wanted.
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The Killing of Qassem Suleimani Is Tantamount to an Act of War @Newyorker Law & Politics |
On orders from President Trump, the United States killed Major General
Qassem Suleimani, the leader of Iran’s élite Quds Force and the
mastermind of its military operations across the Middle East, in an
overnight air strike at Baghdad’s International Airport. The
assassination was the boldest U.S. act in confronting Iran since the
1979 revolution, tantamount to an act of war. A brief statement from
the Pentagon described it as a “decisive defensive action” designed to
protect U.S. personnel abroad. But the strike represented a stunning
escalation between Washington and Tehran, and it may well have the
reverse effect.
Iran’s Supreme Leader, Ayatollah Ali Khamenei, declared three days of
public mourning and warned that “harsh vengeance awaits those
criminals behind martyrdom of General Suleimani.” He moved quickly to
name Brigadier General Esmail Gha’ani, who had worked closely with
Suleimani, as the new Quds Force commander.
“The war front is mankind’s lost paradise,” Suleimani was quoted as
saying, in 2009. “One type of paradise that is portrayed for mankind
is streams, beautiful nymphs and greeneries. But there is another kind
of paradise.” The front, he said, was “the lost paradise of the human
beings.” Thousands of followers died under his leadership.
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A former C.I.A. officer calls Suleimani, the head of Iran's Quds Force, the "most powerful operative in the Middle East today." @Newyorker Law & Politics |
Before Shateri’s funeral, Ayatollah Ali Khamenei, the country’s
Supreme Leader, released a note of praise: “In the end, he drank the
sweet syrup of martyrdom.”
Kneeling in the second row on the mosque’s carpeted floor was Major
General Qassem Suleimani, the Quds Force’s leader: a small man of
fifty-six, with silver hair, a close-cropped beard, and a look of
intense self-containment. It was Suleimani who had sent Shateri, an
old and trusted friend, to his death. As Revolutionary Guard
commanders, he and Shateri belonged to a small fraternity formed
during the Sacred Defense, the name given to the Iran-Iraq War, which
lasted from 1980 to 1988 and left as many as a million people dead. It
was a catastrophic fight, but for Iran it was the beginning of a
three-decade project to build a Shiite sphere of influence, stretching
across Iraq and Syria to the Mediterranean.
When Suleimani appears in public—often to speak at veterans’ events or
to meet with Khamenei—he carries himself inconspicuously and rarely
raises his voice, exhibiting a trait that Arabs call khilib, or
understated charisma. “He is so short, but he has this presence,” a
former senior Iraqi official told me. “There will be ten people in a
room, and when Suleimani walks in he doesn’t come and sit with you. He
sits over there on the other side of room, by himself, in a very quiet
way. Doesn’t speak, doesn’t comment, just sits and listens. And so of
course everyone is thinking only about him.”
“When I see the children of the martyrs, I want to smell their scent,
and I lose myself.”
For Suleimani, saving Assad seemed a matter of pride, especially if it
meant distinguishing himself from the Americans. “Suleimani told us
the Iranians would do whatever was necessary,” a former Iraqi leader
told me. “He said, ‘We’re not like the Americans. We don’t abandon our
friends.’ ”
The Supreme Leader, who usually reserves his highest praise for fallen
soldiers, has referred to Suleimani as “a living martyr of the
revolution.”
“This is the Dasht-e-Abbas Road,” Suleimani says, pointing into the
valley below. “This area stood between us and the enemy.” Later,
Suleimani and the group stand on the banks of a creek, where he reads
aloud the names of fallen Iranian soldiers, his voice trembling with
emotion. During a break, he speaks with an interviewer, and describes
the fighting in near-mystical terms. “The battlefield is mankind’s
lost paradise—the paradise in which morality and human conduct are at
their highest,” he says. “One type of paradise that men imagine is
about streams, beautiful maidens, and lush landscape. But there is
another kind of paradise—the battlefield.”
The good will didn’t last. In January, 2002, Crocker, who was by then
the deputy chief of the American Embassy in Kabul, was awakened one
night by aides, who told him that President George W. Bush, in his
State of the Union Address, had named Iran as part of an “Axis of
Evil.” Like many senior diplomats, Crocker was caught off guard. He
saw the negotiator the next day at the U.N. compound in Kabul, and he
was furious. “You completely damaged me,” Crocker recalled him saying.
“Suleimani is in a tearing rage. He feels compromised.” The negotiator
told Crocker that, at great political risk, Suleimani had been
contemplating a complete reëvaluation of the United States, saying,
“Maybe it’s time to rethink our relationship with the Americans.” The
Axis of Evil speech brought the meetings to an end. Reformers inside
the government, who had advocated a rapprochement with the United
States, were put on the defensive. Recalling that time, Crocker shook
his head. “We were just that close,” he said. “One word in one speech
changed history.”
“Suleimani was lucky,” Dagan, the former Mossad chief, told me,
referring to the raid. “It’s important to be lucky.”
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Deutsche Bank's loans to Donald Trump were underwritten by Russian state-owned VTB Bank, according to whistleblower FBI Forensic News H/T @ScottMStedman Law & Politics |
Deutsche Bank’s loans to Donald Trump were underwritten by Russian
state-owned VTB Bank, according to the whistleblower whose collection
of thousands of bank documents and internal communications have
captured the recent attention of federal investigators.
Val Broeksmit acquired the emails and files of his late father,
Deutsche Bank executive William S. Broeksmit, after Broeksmit
tragically took his own life in 2014.
Val informed the FBI in late 2019 about his knowledge of VTB’s
underwriting of Trump’s loans, information he attributed to a network
of sources connected to the bank he cultivated over the past five-plus
years.
Underwriting is the process where financial institutions assess the
ability of potential customers to fulfill their obligations.
Underwriters have access to “credit and financial information, as well
as the state of the [property],” according to US News, though
underwriters can sometimes be unknown to the person seeking the loan.
Forensic News is not confirming the underlying claim that VTB
underwrote Trump’s loans from Deutsche Bank.
Val Broeksmit’s full statement is below:
The Russian state bank VTB underwrote loans to Donald Trump via
Deutsche Bank. Over the course of Trump’s relationship with DB, an
inordinate amount of questionable, mismanaged & risky loans approved
by Deutsche Bank to Trump required his Personal Guarantee which, over
time, also lost its value.
Trump’s team at DB sought out creative ways to circumvent the varied
protections DB’s compliance team institutionally implemented, &
whether by happenstance or by design Trump’s loans became underwritten
by Russia’s own VTB.
I informed the FBI of this in 2019.
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13-AUG-2019 :: The Feedback Loop Phenomenon Emerging Markets |
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.
This will surely exert serious downside pressure on those countries in
the Feed- back Loop.
The Purest Proxy for the Chi- na, Asia, EM and Frontier markets
feedback loop phenomenon is the South African Rand aka the ZAR.
Frontier Markets
Sub Saharan Africa
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Next Africa: Trade, Risks and Resolutions @business Africa |
Much of Africa faces bleak economic prospects in 2020, including its
biggest economies, South Africa and Nigeria. But the continent can't
be accused of lacking ambition.
If all goes to plan, the world’s largest free-trade zone by area will
start in July. The idea is to gradually integrate the economies of 53
of the continent’s 54 nations (Eritrea hasn’t signed up) to create a
zone covering 1.2 billion people, with a combined gross domestic
product of $2.5 trillion.
The African Union-led agreement is certainly needed. Only 15% of
Africa’s trade is between nations on the continent, compared with over
70% in Europe. To blame: a myriad of ever-changing regulations,
snarled border posts and poor infrastructure.
For the African Continental Free Trade Area to succeed, many nations
are going to have to put aside their protectionist tendencies and
lessen dependence on customs revenue. To start, the big winners will
be countries with an industrial base — most notably South Africa and
Egypt — that can be used to sell manufactured goods to the African
middle class.
South Africa: Tough Decisions
President Cyril Ramaphosa's 2020 resolutions start with his plans for
South Africa's failing state-owned enterprises.
The national airline is in bankruptcy protection. Power utility Eskom
is struggling to keep the electricity on and still lacks a solution to
its crippling debt. The Passenger Rail Agency of South Africa, which
runs the continent’s largest commuter rail service, is under
administration.
Ramaphosa says the state companies can be saved with “extraordinary
effort and, in some cases, tough decisions.” A willingness to follow
through could make all the difference for South Africa’s economy. The
country faces the near-inevitable loss of its final investment-grade
credit rating during the first quarter.
Ramaphosa will either be remembered as the president who set the
economy on a recovery footing or drove it deeper into malaise. The
next 12 months will be crucial.
Nigeria: Downside Risk
Nigeria’s lucrative carry trade is losing its charm and is putting the
naira at risk of devaluation in 2020.
The country's central bank offered rates that were once as high as 18%
on bills known as open-market operations, or OMOs, sold to boost
reserves and protect the naira. About 17 trillion naira ($47 billion)
of these securities are now outstanding with around a third held by
foreigners.
A chunk of OMO notes mature early next year and it’s uncertain whether
foreign holders will renew. Yields on the securities are now lower at
an average of 13%, and liquidity is limited after the central bank
barred local pension funds from investing.
Dollar outflows from the country are higher than inflows and external
reserves are down almost 10% since June. Oil revenues could support
the naira if crude prices remain stable. Renaissance Capital estimates
the currency is 28% overvalued, though. The downside risk is high.
Ghana and Ivory Coast: History Lessons
Ghana and Ivory Coast will need to show they’ve learned from the
mistakes of previous ballots as West Africa’s second- and
third-largest economies prepare for elections.
President Nana Akufo-Addo’s commitment to fiscal discipline will be
severely tested in Ghana, which has a record of budget blowouts in
election years. The president is likely to compete with predecessor
John Mahama in the December polls.
In Ivory Coast, stability is at risk at a time when political
alliances are shifting. President Alassane Ouattara, who has yet to
say whether he’ll seek a third term, could face his biggest challenge
from former allies. At stake is an economy that’s grown by more than
7% annually since 2012.
Ivory Coast’s last power transition was in 2011, when Ouattara first
took office. At least 3,000 people died then in five-months of
post-election violence after ex-President Laurent Gbagbo initially
refused to accept defeat.
Kenya: Resist the Urge
Now comes the hard part for Kenyan President Uhuru Kenyatta.
A decision to scrap interest-rate caps jump-started loan talks with
the International Monetary Fund. The IMF wants him to increase revenue
to keep up with spending pressures. But despite revenue shortfalls,
Kenyatta says it’s imperative to keep funding projects in
manufacturing, housing, health care and farming for economic growth to
continue at above 5%.
To do so, his administration is willing to allow debt to rise nearly
10% to an anticipated 6.7 trillion shillings ($65.9 billion) next
year. IMF Managing Director Kristalina Georgieva in November voiced
concern about Kenya’s swelling borrowings.
After doubling its debt ceiling to almost match the size of its $100
billion economy, the government will need to show fiscal discipline.
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29-JUL-2019 :: Africa is proudly moving counter-trend with the African Continental Free Trade Area (AfCTA). Africa |
The overarching and interestingly at a time when the Rest of the World
seems to be embarked on a process of Fragmentation and Globalisation
coming apart at the seams,
Africa is proudly moving counter-trend with the African Continental
Free Trade Area (AfCTA).
Of course, the Devil is in the Details of the execution and such
things can simply fall apart in a deluge of Non-Tariff Barriers but it
is a Silver Bullet particularly
if we allow the free circulation of our People who are natural
Entrepreneurs. Just look outside, there are markets just about
everywhere.
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09-DEC-2019 :: Time to big up the dosage of Quaaludes Africa |
This week Moody’s Investor Services downgraded Nigeria to negative and
we learnt that Foreign Investors are propping up the Naira to the tune
of NGN5.8 trillion ($16 billion) via short-term certificates. Everyone
knows how this story ends. When the music stops, everyone will dash
for the Exit and the currency will collapse just like its collapsing
in Lusaka as we speak. Nigeria matters and it has not posted positive
GDP growth above its population growth for a number of years.
Essentially Baba Go Slow’s Nigeria is in reverse gear as is
Ramaphosa’s South Africa which reported -0.6% Q3 2019 GDP. President
Ramaphosa, however, was awarded the Grand Croix de l’Orde National du
Merit, on behalf of the Grand Master, His Excellency Pre- sident Alpha
Conde of the Republic of Guinea. The two biggest beasts in Sub Saharan
Africa are essentially providing fewer opportunities and their
Citizens have been becoming worse off year after year for more than
five years now.
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EAC projected growth rates a mirage due to debt, deficits @The_EastAfrican Africa |
East Africa’s economic landscape is replete with contradictions: While
it is cited as being ahead in economic growth in sub-Saharan Africa
with its GDP projected to expand by 6.1 per cent against a continental
average of 3.6 per cent in 2020, the region is swimming in tough
economic times.
Across the region, analysts caution that economic growth is largely
superficial since it is being driven by public infrastructure
investments as opposed to being private sector-driven.
“Rising debt servicing costs against a backdrop of sluggish revenue
growth will limit governments’ capacity to stimulate economic activity
and/or worsen fiscal balances, posing downside risks to investor
sentiment,” said a Fitch Solutions report released in December.
Analysts at the Institute of Chartered Accountants in England and
Wales (ICAEW) project a slowdown in the region’s economic growth to
6.1 per cent in 2020 from 6.3 per cent in 2019.
EAC countries are therefore facing another challenging year of
balancing budgetary books amid the burdens of servicing public debts,
failure to meet revenue targets driven by a slugging private sector,
shedding of jobs, flattening FDIs and declining volumes of exports.
Across the region, over 40 per cent of revenues will be directed
towards debt servicing at a time when the IMF is warning that debt
across the region is gravitating towards unsustainable levels.
The new year finds the region saddled with debt to the tune of $100
billion, widening budget deficits and expanding current accounts, as
governments undertake mega projects.
Kenya and Tanzania’s total public debts as at June 2019 stood at $58.1
billion and $22.5 billion respectively, while Uganda’s stock of public
loans was $12 billion and Rwanda’s $5.4 billion.
Across the region, key sectors of the economy like agriculture,
tourism, building and construction and transport are underperforming
while manufacturing has slowed down and intraregional trade is on a
decline precipitated by both tariff and non-tariff barriers among the
EAC member states.
With traditional exports declining and imports receipts rising,
putting pressure on the current account, remittances are emerging as
the main source of foreign exchange.
In Tanzania, analysts at Fitch Solutions are forecasting a sluggish
year for the economy, a situation that could be compounded by national
elections in October.
In 2020, Tanzania’s economy is projected to grow at 5.3 per cent, way
below a 10-year average of 6.3 per cent registered between 2007 and
2017 on the backdrop of weak investment, poor agricultural harvest and
challenging global macroeconomic headwinds.
“Private consumption and government fiscal stimulus will be supportive
of growth, but will be insufficient to prevent the economy performing
below its potential over the coming quarters,” said Fitch.
It added that with FDIs declining, budget deficit is bound to increase
to 3.7 per cent in the 2020/21 financial year from 3.5 per cent this
year.
Despite the gloomy projections, Tanzania’s Minister for Finance and
Planning Dr Phillip Mpango said the country has not exhausted its
window for borrowing considering that debt ratios are below
international thresholds.
“The ongoing debt assessment shows the country still stands a chance
to continue borrowing from within and abroad to finance its
development activities and pay off maturing loans using its internal
and external revenue on time,” he said.
In Uganda, the government is already on the spot over plans to borrow
$2 billion in 2020/21 financial year from external lenders to partly
finance its $17 billion budget. This will be a slight decline from the
$2.6 billion borrowed in this financial year.
The Budget Framework Paper shows that with revenues expected to
increase marginally to $9.3 billion from $8.8 billion, borrowing will
be the only option in plugging the deficit.
Kenyan taxpayers are bound to lose $217.2 million in a dam scandal
that has hugely exposed the economy to corruption and wastage of
public resources.
Despite the huge cost of corruption, Kenya is facing a monumental
burden of servicing China’s debt for the standard gauge railways
following the expiry of the five-year grace period.
Loan repayments to China’s Exim Bank will jump from the $303.3 million
paid in the year to June 2019 to $698.6 million in the current fiscal
period, reflecting a 130 per cent increase.
Kenya’s Central Bank Governor Dr Patrick Njoroge is on record accusing
the National Treasury of fudging revenue figures, forcing the country
on a borrowing spree to plug a rising budget deficit.
Speaking after the Monetary Policy Committee meeting in November, he
blamed the economic malaise on a lack of commitment in fiscal
consolidation.
“There is lack of a long-term strategy on how to manage the economy
because governments are focused on implementing the budget with debt
repayment being a major priority. This compromises development
funding,” said Ken Gichinga, chief economist at Mentoria Economics.
He, however, added that across the region, a proactive stance by
central banks to contain inflation, stabilise currencies and guarantee
a stable interest rates regime has saved the region from deeper
economic problems.
In Kenya, that key sectors of the economy are struggling is evident
with official data showing that economic growth decelerated to 5.1 per
cent in the third quarter of 2019 compared with 6.4 per cent in the
same period in 2018.
Only Rwanda, which over the past decade has been among the fastest
growing economies, is expected to anchor growth in the region
expanding at eight per cent from 7.8 per cent.
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