|Wednesday 16th of February 2022
Is Our Pandemic the Ghost of the 1889 Russian Flu? @TheTyee H/T @RadCentrism
In 1889, a mysterious disease arose in the Asian city of Bukhara, an ancient trade centre in what is now called Uzbekistan. It soon spread to the port city of St. Petersburg in Russia.
By December it had conquered most of Europe, catching free rides on newly completed continental railroads or shiny steamships that crossed the Atlantic in six days.
Everyone called the malady the Russian flu or that “dreaded Russian disease” because it travelled from the East with a rapidity that would not have surprised Omicron observers.
At the time, physicians initially discounted the outbreak as nothing more than a “jolly rant” or another cold. Most predicted a mild and short visitation. They were wrong on both points.
The “dreaded Russian disease” persisted in waves over a five-year period, eventually killing more than 1.5 million people on a planet then inhabited by only 1.5 billion humans. It reappeared in 1900.
About one in a 100 people infected by the contagion either died from pneumonia or experienced severe illness affecting the brain, lungs or stomach.
The breadth and persistence of the outbreak reintroduced the word “pandemic” to the English vocabulary.
To this day, the little-known biological storm ranks as one of the globe’s great disease outbreaks in terms of scale and mortality.
Now, 133 years after that event, virologists and historians suspect that a novel coronavirus triggered the so-called “Russian flu pandemic.”
Many view this pandemic as a dramatic historical preview of the current one — complete with variants, waves and longhaulers suffering from chronic neurological complications.
Here are five scenes from this fascinating and evolving story:
SCENE ONE: BELGIUM, 2005
After Severe Acute Respiratory Syndrome, or SARS, scared the world with an aborted outbreak that killed 800, the coronavirus family suddenly fell into scientific fashion.
In particular, many researchers wondered about four members of this virus family — types 229E, NL63, OC43 and HKU1 — that cause common human colds.
Were they as benign as they appeared and did they begin their evolutionary careers that way?
A group of Belgian scientists at the Leuven University began that inquiry by sequencing the genome for OC43.
To their surprise, it bore many genetic similarities to a disease-causing coronavirus in cattle. (Most coronaviruses live in animals — everything from whales to bats).
First identified in 1967, OC43 accounts for about 10 to 30 per cent of all the sniffles and other minor ailments people associate with having “a cold.” As a consequence, medical authorities gave it short shrift.
In contrast, when veterinarians discovered a bovine coronavirus in Nebraska in 1971, they took a different attitude. The bovine coronavirus not only caused severe diarrhea in calves, but it was later found to cause winter dysentery in adult cows and shipping fever in feedlot cattle.
Researchers eventually called the triumvirate illness — needing several factors to elicit sickness — Bovine Respiratory Disease Complex, or BRDC.
Researchers suspected that the emergence and spread of BRDC had a lot to do with “existing herd management practices including crowded housing, transportation, constant influx of new animals, production-associated stresses in cows.”
Puzzled by similarities between BRDC and OC43, the Belgium researchers performed what is called “a molecular clock analysis” and traced the evolution of the two viruses back in time to approximately 1890.
That’s where they found a common ancestor in cattle for both viruses.
Around 1890, the bovine coronavirus diverged and popped into human populations as OC43, where it began another evolutionary journey that ended unpredictably as a common cold.
The researchers cited some striking arguments to support their hypothesis.
In the second half of the 19th century, a number of highly infectious epidemics or murrains plagued cattle around the world as urbanization, globalization and industrialization unsettled agricultural landscapes.
They included a mycoplasma, rinderpest and possibly coronaviruses — long a fixture of wild ruminants.
The outbreaks prompted massive killings of infected cattle. The relentless culling created opportunities for the spread of animal viruses from their handlers to urban populations and other ruminants as well.
In addition, the researchers noted that a troubling influenza pandemic had swept over the world in 1890.
The symptoms of the pandemic included high fever, pneumonia and strange central nervous system disorders that often lasted for years.
What’s more, influenza viral experts had not been able to trace the pandemic to a particular influenza subtype with any real precision.
The study concluded that the SARS outbreak in 2003 wasn’t an anomaly, but part of a phenomenon that proved the “viral promiscuity” of coronaviruses.
The study appeared in the Journal of Virology with little fanfare and was largely forgotten until the 2019 pandemic.
SCENE TWO: LONDON, 1891
Dr. Henry Franklin Parsons, a distinguished physician in England, had a problem.
Alarmed by a troubling influenza epidemic that had given “rise to much inconvenience” and “much pain,” the British government has asked him to file an extensive report.
But Parsons faced a medical puzzle. Although the epidemic definitely appeared to be some form of influenza, it didn’t exactly behave that way.
“The catarrhal symptoms have been less recent than in many former epidemics,” noted Parsons in his 1891 Report on the Influenza Epidemic of 1889-90.
The general absence of congested nasal passages and sniffling in so many of the sick led some observers “to doubt whether the recent epidemic has been one of true influenza,” wrote Parsons.
One chronicler bluntly described some of the afflicted as “persons in a peculiar dazed stupid condition for about two weeks, unable to think or do their work.”
In addition, the strange malady primarily struck down older adults and left children relatively unscathed, which wasn’t how classic influenza normally worked.
Persons with weak lungs and those suffering from heart disease or kidney troubles also appeared to most seriously affected. Death by pneumonia was not uncommon.
Other doctors told Parsons that they likened the outbreak not to influenza, but to malaria and dengue fever.
They noted that the dreaded Russian disease caused “distressing pain” in the forehead, temple, eyes and face. Some even prescribed quinine, an anti-malarial drug, for treatment.
Moreover, these neurological pains reoccurred in devastating bouts. The infected also lost their sense of smell and taste.
In the end, Parsons carefully catalogued all of these puzzles, but stuck to his influenza diagnosis.
He explained away the anomalies by noting many physicians really hadn’t seen an influenza epidemic before (the last one to hit England occurred in 1847) and that maybe the weather accounted for some of the different symptoms.
But Parsons wasn’t the only doctor to note a raft of inconsistencies. In Ontario, Canada, the Hamilton Herald reported that the Russian flu “differs entirely from any previous kind of influenza,” adding that “it visits the seat of disease which is incident to the person attacked such as the kidneys, liver, lungs and heart.”
SCENE THREE: UNIVERSITY OF LONDON, 2020
As medical historian and journalist Mark Honigsbaum started hearing more stories about the baffling conditions experienced by COVID-19 longhaulers, he realized that historically, they weren’t alone. Nor were they the first.
Like COVID, the Russian flu left behind a large population of invalids suffering from a bewildering array of neurological symptoms, including loss of memory, loss of energy, anxiety and “post-grippal numbness.”
The conditions, which often lasted years, intrigued and baffled doctors throughout the 1890s.
As Honigsbaum noted in an article in The Lancet: “The official end of the pandemic, therefore, did not mean the end of illness but was merely the prelude to a longue durée of baffling sequelae.”
One specialist doctor even observed the dreaded Russian disease “runs up and down the nervous keyboard stirring up disorder and pain in different parts of the body with what almost seems malicious caprice.”
The English suffragette Josephine Butler, for example, compared her chronic ailment to a bout of malaria.
“I am so weak that if I read or write for half an hour I become so tired and faint that I have to lie down,” Butler wrote to a friend.
Other public figures felled by insomnia and fatigue included the British prime minister and even the First Lord of the Admiralty.
Long-term complications from the Russian influenza were so prevalent, that by the middle of the 1890s, doctors blamed everything from rising suicide rates, to general feelings of unease and depression to the long shadow of the disease.
In fact the pandemic’s invalids became “central to the period’s medical and cultural iconography,” noted Honigsbaum.
But unlike the current pandemic, sufferers of long-term symptoms received unparalleled attention from the medical community throughout the 1890s.
With fewer experts, general practitioners paid more attention to the whole patient and wrote entire treatises on the flu’s longhaulers.
Honigsbaum then offered some advice to the current medical community, which has been slow to recognize the scale and significance of long COVID:
“As they adjust to the pandemic’s longue durée, physicians might find it helpful to look back to the Russian influenza and the historical accounts of the sequelae, even as COVID-19 longhaulers look to digital, patient-centred and activist forums for support and validation in the present.”
A year later, Honigsbaum wrote that if the Russian flu pandemic was indeed due to a coronavirus that infected at least 60 per cent of the population, the experience does not auger well for the future.
“Herd immunity does not appear to have been reached hence the recurrent waves of illness, marked by high mortality.”
SCENE FOUR: BELGIUM, 2001
Intrigued by the growing parallels between COVID-19 and the Russian flu pandemic, Harald Brüssow, another researcher at Leuven University, reviewed the medical literature on the 130-year-old outbreak, including Parson’s report.
He found that Parsons wasn’t the only doctor to notice that the “Russian flu” behaved in weird ways. Or like COVID-19 today.
Clinical data from German medical reports, for example, told a familiar story:
“Neuralgic pain and prostration is prominent and for 92 per cent of the patients neurological complaints dominated the disease. Patients noted mostly headache, and less frequent back and muscle ache. A quarter of the patients were incapable of resuming their usual activity even without showing other symptoms of illness.”
The Germans also reported episodes of blood-clotting, just as physicians have with COVID:
“Phlebitis and thrombosis was frequently observed in the recovery phase, even deadly cases of sinus thrombosis occurred. Striking were cases of thrombosis in arteries.”
Given that the Russian flu pandemic came in three waves, Brüssow speculated that they “might represent the appearance of variant viruses.”
Reports from the 1890s also found crowding and insufficient ventilation led to mass infections. The sick overwhelmed hospitals and the military set up tents for the afflicted. Schools and universities closed.
Mortality rates increased by 30 per cent compared to pre-pandemic years in some cities.
In Madrid, the authorities ordered funerals to take place at night so as not to alarm the living.
Brüssow also discovered that pandemic apparently re-emerged in 1900, killing a good number of physicians with a multi-organ disease.
At the time, doctors tellingly classified this outbreak in The Lancet into four categories:
One attacked the mucous membranes; another hit the gastrointestinal tract; a third attacked the heart; and a fourth targeted the nervous system.
Patients suffered from shortness of breath, thrombi in the brain, loss of smell and even developed diabetes after being infected.
The researcher offered a brief conclusion: “Since these observations resemble more of a COVID‐19 related disease than classical influenza, we must consider the possibility of a coronavirus‐induced pandemic in 1889–1890 and a resurgence of this pandemic 10 years later, peaking in 1900.”
In a separate paper, Brüssow asked what the 1890 pandemic might tell us about the unpredictable progress of COVID.
Given a divided global population of eight billion people armed unequally with a variety of medical interventions, “it is by no means clear whether an epidemic with similar base characteristics will be a replay of one which occurred 130 years ago,” he wrote.
He added this sobering thought: “If the data from the end of the 19th century are an indication, COVID-19 may occupy us for a decade in multiple infection waves without much clinical attenuation if not stopped by vaccination programs that achieve herd immunity or breakthroughs in drug development which make COVID-19 a treatable disease with low mortality.”
SCENE FIVE: UNIVERSITY OF ARIZONA, 2021
Convinced that coronaviruses have probably played a critical role in previous epidemics, a team of researchers form Arizona and Australia parsed the human genome for evidence.
About 20,000 years ago, a coronavirus epidemic left an imprint on the DNA of people living today.
The outbreak interacted with human genes in East Asia and left behind a calling card: antiviral modifications in at least 10 different human genes.
The gene fortification only occurred in an East Asian population and probably required a lot of deaths for the human genome to respond with these modifications.
The researchers concluded that ancient RNA virus epidemics have probably occurred frequently in human evolution.
“It should make us worry,” David Enard, an evolutionary biologist at the University of Arizona, told the New York Times.
“What is going on right now might be going on for generations and generations.”
14-FEB-2022 :: The Question remains why the US should be getting ahead of Volodymyr Oleksandrovych Zelenskyy on a continuous basis.
And here I refer you to Fabio Vighi and his two articles
THE CENTRAL BANKERS’ LONG COVID: AN INCURABLE CONDITION FABIO VIGHI
RED PILL OR BLUE PILL? VARIANTS, INFLATION, AND THE CONTROLLED DEMOLITION OF SOCIETY BY FABIO VIGHI
Sure the Narrative around COVID has now largely bust wide open at the seams. Society in so many places from Ottawa to Paris and all points in between is witnessing metastatic level protests, the ''Lockdown'' economy's shelf life has expired. Its morphing into a Tsunami.
Some European Countries have seen the writing on the wall. Its a little counterintuitive because cases remain sky high.
2,644,640 new Global COVID cases grew 405.7M total 0.66%. 5,783,533 total deaths increased by 0.19% with 10,948 new deaths. @jmlukens and the long range fallout of long Covid unfathomable.
These developments led to a seismic shift in the markets before Fridays whipsaw
Deutsche Bank's Jim Reid notes that yesterday's surge in the 2-year US Treasury yield was, by one measure, "the biggest "shock" since October 1979 when Volcker announced his intentions on the world @ReutersJamie
The last time inflation was here, February 1982 - the Fed Funds Rate was 15%. @Convertbond
Dartmouth economist and former Fed adviser Andrew Levin says the Fed needs to get rates to a neutral setting within a year or so, and that the means getting the Fed Funds rates up to 4% or 5%
Its a Wizard of Oz moment
24 JUN 19 :: Wizard of Oz World.
This is ‘’Voodoo Economics’’ and just because we have not reached the point when the curtain was lifted in the Wizard of Oz and the Wizard revealed to be ‘’an ordinary conman from Omaha who has been using elaborate magic tricks and props to make himself seem “great and powerful”’’ should not lull us into a false sense of security
The Curtain has been lifted and Mr. Powell has now arrived at his Volcker moment
Friday's action and next immediate sessions might afford us the greatest macro trading opportunity to reset shorts in the US 10 and Ultra Bond.
We can look across all G7 Bonds because this is a Super Bubble that is going to burst big. There is no way out now.
There is no training – classroom or otherwise.. that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market.
There's typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. Paul Tudor-Jones
Its the End of the Bull market obviously.
The Music has been playing for Eternity and its about to stop
Emerging markets: all risk and few rewards? @FT
The difference between the pace of growth in developing and advanced economies is set to narrow to its lowest level this century.
For emerging markets seeking investors, that is a problem: the point of investing in a developing economy is that it offers markedly quicker growth than developed ones. Without that, the money will go elsewhere.
Emerging market assets traditionally have greater yields than those available in rich countries for two reasons. One is that their economies are growing faster. The other is that they are riskier.
“Without growth, it’s just [all] risk,” says David Lubin, head of emerging market economics at the American bank Citi.
The case for investing in emerging market stocks and bonds has rarely been weaker — something the IMF data on growth rates reinforces.
The coronavirus pandemic is ongoing, often in places where vaccination rates are stubbornly low, and economies have been weighed down by debts incurred to help cope with its impact on public health and businesses.
Higher interest rates in the US and a stronger dollar are looming on the horizon, making those debts harder to service and defaults more likely.
And across large parts of the developing world, inflation has risen alarmingly, forcing policymakers to raise interest rates aggressively to avoid a spiral into the hyperinflation that has plagued many of these countries in the past. When coupled with stuttering global trade it paints a gloomy picture.
The biggest immediate example of such risk is Sri Lanka. Stricken by the hit to its tourism sector during the pandemic, the country has almost $7bn in interest and debt payments due this year, but less than $3bn in foreign reserves.
Although the government believes it can weather the crisis as tourists return and exports pick up, it has also sought relief from creditors such as India and China, which has funded infrastructure projects such as the Hambantota port and Colombo Port City.
Even so, many bondholders now see a default as inevitable.
Ed Parker, head of global sovereign research at Fitch Ratings, a credit-rating agency, talks of “a long tail of weak, fragile frontier markets” that look to be at risk.
Investors are particularly concerned about countries such as Ghana, El Salvador and Tunisia — not to mention Ukraine, should Russia invade.
“This is not an abstract concept,” warns Parker. “Given the pandemic, many of them are much less able to withstand the shocks that could hit them this year.”
Six countries have already defaulted during the pandemic: Argentina, Belize, Ecuador, Lebanon, Suriname (twice) and Zambia.
Yet even while larger countries are not at immediate risk of default, many have suffered a deterioration in credit conditions.
In 2020, Fitch issued a record 45 sovereign downgrades affecting 27 of the 80 emerging markets for which it prepares ratings, including Mexico and South Africa. It downgraded Turkey last week.
This is bad news, and not only for investors. The influx of foreign capital into emerging markets since the 1980s has contributed to a huge reduction in poverty levels and growth in middle classes globally. If it continues shrinking, the frontier countries with the most pot
“Two years into the pandemic,” says Rebeca Grynspan, secretary-general of the United Nations Conference on Trade and Development, “the problems [of debt, inflation and slow growth] will only mount.”
Looking for the positives
The outlook is not wholly bleak, say analysts. Many emerging economies are much better placed today to withstand such difficulties than they were in the past.
Previously, persistent and deep current account deficits made countries vulnerable to external shocks and dependent on foreign finance.
Now, in aggregate, emerging markets are running a current account surplus. Many, including Brazil, South Africa and India, have substantial reserves of foreign exchange and deep local capital markets, which offer protection from swings in exchange rates and in foreign investors’ appetite for risk.
For exporters of commodities and other goods, international prices have moved in their favour. Although big countries from India to Brazil have suffered terribly in the pandemic, many smaller countries, especially in sub-Saharan Africa, have coped far better with the public health and economic consequences of the crisis than first feared.
So many foreign investors have retreated from emerging market stocks and bonds that there is little risk of a further sell-off, and prices have fallen low enough to tempt some back in.
Some asset managers are even predicting a bumper year ahead — or at least a quiet comeback.
Fixed income investors also have reasons to be cheerful. While the world waits for the US Federal Reserve to begin raising its policy interest rate as soon as March to rein in rapidly rising prices, central banks in many emerging markets are already far ahead of it.
Russia, Brazil and many others began raising interest rates almost a year ago.
Not for them the luxury of waiting to see whether rising food and fuel prices would turn out to be temporary or long-lasting.
A history of runaway inflation in several of these countries forced policymakers to act quickly.
Brazil, for example, has steadily increased its policy rate from 2 per cent in March last year to 10.75 per cent today.
It is expected to peak at 12 per cent before being pared back towards the end of this year. Consumer price inflation, running at more than 10 per cent, is expected to fall to 5.5 per cent over the same period.
This combination of high interest rates and relatively low inflation can be a giant magnet for fixed-income investors.
The high yields available on hard currency bonds — issued mostly in dollars and euros from smaller emerging markets — already offer tempting annual returns in the high single digits.
For more than a decade, however, interest rates in emerging economies have been falling and their currencies weakening, making local currency bonds less appealing to foreign investors.
Now with high domestic interest rates in larger emerging economies, the traditional carry trade — borrowing where rates are low to invest where they are high — could be revived, triggering a long-awaited boom in local-currency bonds.
“If I write one more report saying we are positive on EM local debt, I’ll get fired,” jokes Polina Kurdyavko, head of emerging market debt at BlueBay Asset Management. “It hasn’t worked for 12 or more years — but it could finally work out this time.''
“We are at a crunch point,” Kurdyavko adds. “I don’t remember any year like this, where there are so many risk events that could turn into double-digit positive or double-digit negative returns.”
Following the Fed
The key risk event for emerging markets in 2022 is rising US interest rates. “History tells us that when the US has its own inflation problem to deal with, that’s bad for emerging markets,” Lubin says.
US interest rates ticking upwards present two problems. First, they reduce the appeal of investing in emerging market assets, making it harder to attract foreign capital. To put a dent in that appeal, US yields do not have to rise by very much.
The inflation-adjusted yield on 10-year US Treasury bonds, which has been negative throughout the pandemic, has risen this year from about minus 1 per cent to minus 0.5 per cent.
That may not seem significant, nor very appealing when compared with the yields available from emerging markets assets. But in markets, Lubin says, direction matters as much as level.
Investors seem to agree. With the exception of China, emerging market stocks and bonds suffered as much as $7.7bn in outflows of foreign money in January, according to data from the Institute of International Finance.
The second problem with increasing US rates is that they tend to make the dollar rise against other currencies.
For developing countries, where currencies are often volatile, this increases the cost of servicing any existing dollar-denominated debts and makes foreign finance expensive, putting a further damper on investment.
It is also bad for trade, which needs investment in logistics and supply chains. There is a growing body of evidence that such costs outweigh any benefits to exporters from their own currencies becoming more competitive against the dollar.
In the short term, says Gita Gopinath, chief economist at the IMF, “the extensive use of the US dollar in trade means that export volumes in the selling country do not react much to a depreciation of its currency”.
If inflation is falling thanks to well-executed policy, that’s a good thing. But if it is falling because GDP is slowing, that is decidedly negative.
Emerging markets are not just slowing relative to developed ones. In many places, output is plummeting.
In Brazil, for example, GDP growth is forecast to fall from 4.7 per cent in 2021 to 0.3 per cent this year, according to a central bank survey of economists.
One cause of the slowdown is debt. Rich countries, led by the US, threw all they could at the pandemic when it struck, pouring trillions of dollars into their economies in a bid to stimulate activity and support businesses and populations in difficulty.
Developing countries were able to do much less. While advanced economies announced the equivalent of 11.7 per cent of GDP in fiscal spending during the first six months of the pandemic, the figure for emerging middle-income countries was 5.7 per cent, according to the IMF. In low-income countries, it was just 3.2 per cent of GDP.
What support these countries did provide was largely funded by debt — made cheaper for some governments by the trillions poured into financial markets by the Fed and others.
Data compiled by Fitch show the median level of government debt to GDP in 80 emerging markets rising from just under 50 per cent in 2019 to more than 60 per cent in 2020 — a huge increase for a single year.
The problem is particularly acute for the 50 smaller economies rated by Fitch, where not only are debt levels higher but the share of foreign currency debt is much greater than in the 30 largest economies.
That leaves those economies, which are generally weaker than their larger peers, particularly exposed to the rising dollar.
A leading source of output growth for emerging economies has traditionally been global trade. But that too is deteriorating.
After a strong, trade-driven recovery for many countries last year, trade growth is set to slow sharply in 2022 and 2023 as pent-up demand dissipates, according to the World Bank.
And while some countries such as South Africa were able to benefit from rising commodity exports in 2021, in others, especially in Latin America, gains were overshadowed by local difficulties, whether social, political or economic.
Especially problematic is the slowing pace of output growth in China, which for many years has been the biggest single engine of economic expansion for other developing countries.
Changing priorities in Beijing mean that future growth will be both slower and also less import dependent, delivering a double blow to those reliant on Chinese demand.
In 2003, when Luiz Inácio Lula da Silva began his first term as president of Brazil, Chinese growth was at its most powerful. It drove the commodities supercycle that lifted hundreds of millions of people including many in Brazil out of poverty.
Twenty years on and Lula is expected to take on Jair Bolsonaro, the incumbent, in October’s presidential race, against a very different backdrop.
And neither candidate is thought likely to execute the kind of structural reform needed to create productive investment and growth.“Emerging markets grow thanks to luck or skill,” says Lubin. “This year they are lacking both.”
Mirrors on the ceiling, The Pink champagne on icehttps://bit.ly/3Bk45Gj
Last thing I remember, I was Running for the door
The Music has been playing for Eternity and its about to stop
Nigeria crossing the event horizon of an economic black hole H/T @drmwarsame·
The Federal Government’s gross debt profile is projected to grow by 92.11 per cent from N70.85tn in 2022 to N136.11tn in 2026, according to the International Monetary Fund.
The Washington based lender made this projection in a report titled ‘Nigeria Staff Report for the 2021 Article IV Consultation.”
According to the Fund, the gross debt figures of the Federal Government and the public sector include overdrafts from the Central Bank of Nigeria, promissory notes and AMCON debt.
This means debt including Ways and Means have been factored into the total debt profile of the government.
The Debt Management Office put Nigeria’s public debt totalled N38tn as of the end September, 2021.
IMF in the latest report said the projections were sourced from Nigerian authorities and its staff estimates and projections.
In a table titled, ‘Nigeria: Federal Government Operations, 2017–26,’ the IMF said Federal Government’s debt is expected to grow to N70.85tn in 2022, N83.17tn in 2023, N97.80tn in 2024, N115.38tn in 2025, and N136.11tn in 2026.
The IMF said, “Nigeria’s level of public debt increased sharply last year due to the COVID-19 crisis. Public debt had been on an increasing path in the last decade reaching 29 per cent of GDP in 2019 from 9 per cent in 2009, driven by primary deficits as weak non-oil revenue mobilization failed to compensate for falling oil revenues.
“In 2020, the sharp decline in oil revenues increased public debt further to 35 per cent of GDP. The debt-to-GDP ratio is expected to increase in the medium term to 43 per cent of GDP, despite favourable growth-interest rate dynamics. Gross financing needs are expected to increase to 8.9 per cent of GDP in 2021 from 7.3 per cent in 2020, and to 11.4 per cent in the medium term.”
It added that although interest payments were only two per cent of the GDP in 2020, about 89 per cent of federal government revenues were expended on interest payments, reflecting poor domestic revenue mobilisation capacity.
It said the government‘s interest-to-revenue ratio is expected to slightly decline to around 86 per cent in 2021 before hitting 139 per cent by 2026.
Within the period under review, the Washington-based lender also projects that government spending will rise by 69.91 per cent from N17.24tn in 2022 to N29.29tn in 2026.
It also projects government expenditures of N18.57tn in 2023, N21.51tn in 2024, N25.24tn in 2025, and N29.29tn in 2026.
Recurrent expenditure will account for most of government spending, rising to N13.59tn in 2022, N14.69tn in 2023, N17.47tn in 2024, N20.67tn in 2025, and N24.12tn in 2026.
While capital expenditure will account for a fraction of the spending, accounting for N3.65tn in 2022, N3.88tn in 2023, N4.04tn in 2024, N4.57tn in 2025, and N5.18tn in 2026.
Even as spending increases, the projected government revenue pales in comparison to spending.
According to the IMF, total government revenue is expected to be N5.23tn in 2022, N6.25tn in 2023 N6.87tn in 2024, N7.66tn in 2025, and N8.57tn in 2026.
It expects the CBN to finance the Federal Government’s spending with N12.01tn in 2022, N12.32tn in 2023, N14.64tn in 2024, N17.58tn in 2025, and N20.73tn in 2026, leaving a budget deficit of N34.57tn for the five years.
According to Washington-based lender, the CBN is projected to help the Federal Government finance its budget with N5.63tn in 2022, N5.36tn in 2023, N6.45tn in 2024, N7.69tn in 2025, and N8.35tn in 2026.
In January, the President, Major General Muhammadu Buhari (retd.) signed the 2022 Budget into law. The budget provides for government spending of up to N17.13tn.
While presenting the 2022 in 2021, the Minister of Finance, Zainab Ahmed, projected a revenue target of N10.7tn for the 2022 fiscal year.
MWANGI: Why I believe Congo will drive @KeEquityBank group’s growth @The_EastAfrican
N.S.E Equities - Finance & Investment
The global commodity prices of the raw materials that the Democratic Republic of Congo produces are at an all-time high.
That is why its current accounts position has changed from a deficit to a surplus, driven by the demand for electric cars.
It has coltan, copper and cobalt, which is used in making electric vehicle batteries.
The world is going green, and the biggest driver is demand for green locomotive energy.
Now 70 percent of coltan and cobalt comes from the DRC, and the highest copper quality in the world, accounting for 30 percent of the world's supply.
So we can see as demand picks up, as the world wants to have zero transport-linked emissions by 2030, the demand can only go up, and prices can only go up because of constrained supply.
We believe with economic and political reforms, then the benefits will trickle down to the people.
Transformation of the economy can happen within a very short time because it's enabled financially, there is political will, the population is hungry, and the economy has been opened.
DRC has for long been closed to one-to-one relations with Belgium and France. And France, for whatever reason, has always been able to close deals.
DRC has reformed and chosen to join the East African Community, revive relations with its neighbours Uganda, Rwanda, Tanzania and Angola, and Kenya further.
The fact that Equity has subsidiaries in DRC, South Sudan, Uganda, Rwanda, and Tanzania, and that Nairobi is the logistics hub for DRC’s needs for health, education and trade puts us in the right place at the right time.
That Kenya Airways has daily flights to Kinshasa, Lubumbashi and Goma doubles Equity’s opportunities.
Our success is because we had set up base and we had prepared. We didn't allow Covid to disrupt us so we integrated the banks and started enjoying the integrated performance culture of Equity.
What made you choose to go to DRC?
The greatest bet Equity has ever taken was to buy two large banks in DRC, one after the other.
We bought the first, ProCredit Bank, two years before the transition from President Joseph Kabila.
And amid that uncertainty, that political risk, we felt and we bet that the time for DRC to transition and learn from other countries to make progress was right. It didn't happen immediately.
Even after the elections took place Kabila, although not the president, retained the power by controlling 74 percent of the two Houses of parliament.
And that uncertainty didn't bar us from buying the oldest bank, 115-year-old BCDC, with the largest infrastructure in the country.
Fortunately, after the transaction was completed, a political miracle happened and Kabila handed over power to President Felix Tshisekedi.
President Tshisekedi adopted economic and political reforms, addressing governance issues and dealing with corruption.
In the process, he won the trust of the international community. The World Bank renewed its arrangements with the DRC; America, which had suspended the African Growth and Opportunity Act reinstated it; countries like Belgium, which had closed their embassies, reopened.
Then Moody's upgraded the DRC from CCC to B.
The world has referred to DRC as the miracle spot in Africa.
From three days import cover, they are now up to three months cover; from deficit, they have a surplus.
If you look at their momentum, they were at 4.6 percent growth last year and are predicting six percent this year.
How is Equity leveraging this growth as an investor?
That risk we took seems to be paying off big time on two accounts.
One, we have the largest national banking infrastructure – a challenger status because the Congolese banks are still in their 1980s, and here is a bank with the latest technology, policy skills, competence and culture, and financial capability.
It has positioned us to start with a 26 percent market share. We enjoy the economies of scale and size.
DRC has challenged Kenya and is 40 percent of the bank in Kenya that we built over 38 years, in just seven years.
Now that DRC is joining the EAC, are you excited?
Yes. It's incredible: It harmonises monetary and fiscal policy, making it very easy for us to integrate the two banks because the regulation will be almost the same, the tax regimes will be the same, the cross-border customs, the movement of people, labour will be the same.
Presidents Uhuru Kenyatta and Felix Tshisekedi have a unique personal relationship. They have signed seven bilateral agreements, including protecting investments.
Now, that broadens trade, and Kenya has signed agreements that allow Kenya Airways to fly into the major cities in DRC.
Kenya has opened two commercial attaché stations in Goma and Lubumbashi to facilitate cross-border trade.
So, we seem to have been in the right place at the right time when things were happening.
Last year, the biggest growth came from DRC, both in profit and in balance sheet, exceeding 50 percent in both.
We have had a proactive approach in positioning ourselves -- like spending Ksh300 million ($2.6 million) to take 300 Kenyan business people, led by two Cabinet ministers, on a trade mission to explore the opportunities in DRC late last year.
We are a trusted broker, because we know both sides and we have no interest other than in their success.
We gave the Congolese the impression that this is a bank that cares, and the Kenyans that this is a bank that has their interest at heart.
The growth of Equity will most likely now be driven by DRC, and I guess that in the next five years, Equity DRC will be bigger than Equity Kenya.
What’s your growth plan?
We want to disrupt value chains. Value chains can be the agents of development. So we have a plan -- a transformation plan for East and central Africa.
We are talking to investors like Elon Musk of Tesla and telling them that instead of importing cobalt, why not set up a factory in DRC for the electric vehicle batteries?
Why can't he also make copper wires there instead of sending copper ore to China from where he imports wires?
We have also chosen to be the bank for agricultural transformation. And we have decided that our loan book will move from three percent to 30 percent in agriculture.
We will help farmers through the entire value chain: from production to aggregation, to logistics, to manufacturing to export.
Second, we believe that the world will not quickly recover from the disruption of the global supply chain, so we have decided to establish local and regional supply chains.
And that explains our journey to DRC. So, our approach is no longer Kenyan. It is making this region an economically viable market of 380 million and help it industrialise.
We learnt a lot from Covid. We had Ksh1.7 billion ($15 million) to support Kenyans and we decided to supply them with PPE.
But we couldn't get them globally so we decided to hire McKenzie to train our manufacturers and we trained 120. Now, Kenya is not only self-sufficient, but also exporting PPE.
We have set aside Ksh500 billion ($4.4 billion) for our transformation plan.
We have mapped about five million small and medium-sized enterprises, who we want to populate the various supply chains, whether it’s manufacturing, agriculture, clean energy and services, and we believe each of them will provide five direct jobs and five indirect ones.
So, in five years, we’ll have 50 million jobs for the youth in East and Central Africa, and we’ll have reduced our import bill maybe by 60 percent. We have signed the six UN agencies to train the SMEs. The MasterCard Foundation will also train the 50 million youth.
It seems Kenya will benefit a lot from this plan.
We want investors to know the best areas to set up operations. We have mapped Mombasa because of its global logistics hub status.
Kisumu, we feel, should be an industrial hub because of transport by waterways and removing traffic on the road.
There is a petroleum pipeline there. So we have funded a company to build four barges, which can carry four million litres of oil at once.
The oil is pumped into barges and transported to Kampala via Lake Victoria.
So we want industrial logistics, pharmaceuticals, food processing, value addition but, most important, convert minerals in DRC to final products.
And we don’t have people to do it because they will be frustrated by brokers.
We want people like Musk to do it so that he doesn’t import cobalt and copper but batteries and wires from DRC at the same price he’s been buying them from China.
The DRC will then become a huge economy and the wealth will trickle down to the population, who can now get power and other utilities.
The mining is in the eastern side and you can’t supply the market from Kinshasa so it is easier to transport goods from Nairobi. That's why we felt Kisumu would be the best hub.
We will fund Kenya and Rwandan airlines to take care of the logistics. That is what we are calling the resilience plan, which will take us roughly five years.
We have also devoted $2 billion to the Ugandan oil. We want the Kenyans who were frustrated by Tullow Oil and who had bought equipment to become subcontractors.
So we will give them $2 billion for local content. We may have missed the (East Africa Crude Oil) pipeline but we will do the value chain supply and early works.
How did Equity Group beat Covid blues to turn a good profit last year?
Incredibly, in the two years of Covid, Equity doubled its balance sheet from Ksh600 billion ($5.3 billion) to Ksh1.3 trillion ($11.4 billion).
We managed, with our shared prosperity model, our social engine, to build enormous trust capital with the people. We gave them three years to repay loans.
It meant we trusted them even when we didn't know what the future held. We bet on the survival of their businesses and, in return, that trust has now encouraged them to consolidate their banking needs.
That is how we managed to grow twofold within a Covid period.
Our loan book last year grew by 30 percent, from 26 percent the previous year.
We made provisions the previous year, but last year we didn't have to make any.
It was the best year in the history of Equity, and it created the momentum for bank to position itself above any other in the region.
You are struggling in South Sudan. What are the challenges there?
We entered the South Sudan in 2009 and in four years, we had become the largest bank there.
It was the subsidiary that was able in one year to pay Ksh1 billion ($8.8 million) in dividend. But, in 2013, war broke out and it affected trade.
The conflict between South Sudan and Sudan almost made oil exports impossible because Sudan decided to take $26 per barrel as shipment or pipeline fee. Then oil prices went below $30.
So, essentially, South Sudan was making nothing and the economy became suffocated.
The tensions and political disagreements intensified. The international community seemed to lose hope, funding dried up and the people gave up.
The economy ground to a halt, setting off a microeconomic environment where inflation went all the way to 800 percent.
And it was inflationary losses recorded in our books because of the exchange rate, which moved from three South Sudanese pounds to the dollar to 540 pounds to the dollar.
So you can imagine the imported inflation in a country importing 90 percent of its requirements.
Our strategy was to bring down the bank to maintenance and we reduced our branches from 13 to three, and the staff from 480 to 80 just to maintain the licence.
There seems to be hope but we have taken a wait-and-see stance. Every year we are hopeful that it will be better.
You had plans for Ethiopia. Does the current political crisis over Tigray bother you?
We not only had plans for Ethiopia; we had started implementing them. We opened a representative office there, but we were shocked by the turn of events.
And the situation has been getting worse, with countries like America imposing economic sanctions. That has not helped because it's a country that requires support.
It started reforms like liberalising sectors like the telecoms. We were optimistic the banking industry would be liberalised. But, given the situation, I think everybody is just watching.
This is a country that has never been colonised, so it has not had the turbulence that most of the countries in Africa have had. So, there are questions whether it has inbuilt resilience.
The worst part of this situation is that it is an internal implosion. Will people forgive and forget? We have learnt our lesson from South Sudan so we will not rush in.
As a business leader, do you do have any fears about the looming leadership transition in Kenya?
I have been privileged to observe and participate in seven election cycles. My confidence in the Kenyan population and institutions was enhanced in 2017, when the presidential election result was nullified by the Supreme Court and the country still held together.
The judicial system was able to stand its ground. The electoral commission was able to conduct a repeat election, and that gives me hope that our constitutional order and governance structures have muted electioneering shock risks.
The second aspect is that our economy is now not heavily driven by the public sector; the private sector has become bigger in terms of economic activity. And so the private sector can influence the politics.
Again, the capacity of the population to engage and reason is different from the past. Social media platforms have allowed engagement and people can debate issues.
I've also seen our politicians shifting to issue-based campaigns. They are talking about the economy. So I see that the population will drive people-centred politics, hence the Kenya Kwanza, One Kenya Alliance and Azimio la Umoja movements.
Lastly, there’s the misfortune of Covid. Kenyans lost two years and I don't think they are prepared to waste another. So I'm not as worried as I would have been in past elections.
What are your key growth areas in the coming financial year?
There are two things that we have realised we have advantage of. One is our size.
We have become a systemic organisation so we can be an influencer in the financial industry, we can negotiate with the regulator, we can negotiate with the government.
So, what we see is growth in the operating environment, which we can significantly influence.
The second thing is optimising the economies of scale. Equity now is a Ksh1.3 trillion ($11.4 billion) balance sheet company, so it gives you capacity to grow in efficiencies.
I'm optimistic that in the next five years, our cost-income ratio will be below 40 for the Group.
In terms of transformation, we see ourselves growing to a challenger bank by setting the pace of the bank of the future.
The leading area of growth is digitisation: The application of the Fourth Industrial Revolution, and, given a capital base of Ksh200 billion ($1.8 billion) and a liquidity of 64 percent demonstrates our position to execute efficiently to create a challenger bank for Africa.
The other is growth in redefining banking. Equity innovated the shared prosperity model with a twin engine in an economic and social model and a high-volume, low-margin business model.
I see that model, having received global recognition as a super brand and the fifth rated banking brand in the world, it tends to give us confidence that we can now scale.
So, I can see Equity being in 15 countries by 2025, leveraging technology to give virtual banking and converting banking to a 24-hour business by compressing both geography and time.
The last one is impact. Equity’s economic social engine has grown and has a spend of $530 million. With the size and profitability of Equity network, I can only see ourselves going up and that is why we can branch out to get our medical students, the ones we sponsor to university, to run Equity Afya clinics.
We have decided to transform agriculture with those who studied veterinary medicine and agricultural economics; we are setting up Equity agro dealers so that we can change agriculture from the inputs stage.
Who are your partners in the growth plan?
Our major partners are the MasterCard Foundation, the UN, 16 development banks led by the IMF, IFC, African Development Bank, Team Europe.
So far, they have committed $140 billion in long-term funding to support these initiatives so that commercial banking goals can be short-term, and long-term lending is taken over by these global development banks.
The other one is the Commonwealth. We have 19 countries who are members of the Commonwealth and we have agreed to meet during the Heads of State and Government meeting in Rwanda in June to see if we can become a regional trading bloc and become the first to enter the African Continental Free Trade Area under the ambit of the Commonwealth.
The UN has allowed us to set up an office in the resident co-ordinator’s office in Beijing to co-ordinate South-South co-operation to bring Asia to Africa.
Then we have an office in New York to co-ordinate American initiatives to support Africa.
And last is the International Chamber of Commerce, which is bringing car manufacturers to DRC. So that has become our biggest source of mobilising global capital.
We are lucky that the governments of the six countries have signed on the plan.
Kenya wants to be a service country, Uganda is in oil and gas and agriculture, Rwanda is services focused on MICE, financial services, light manufacturing, and DRC wants to do mineral processing and lead the global energy.
There is investor from Australia with whom we’re working closely to lead the way in implementing the INGA dam, his greatest focus being hydrogen so that power costs are low to allow manufacturing in DRC.
Private-public partnership may be the biggest driver of success because it ticks into governments’ mission for cross-border trade and everything. So, everybody’s interests are aligned for once.
.@KenyaAirways sees passenger revenue up by a fifth this year - CEO @Reuters
N.S.E Equities - Commercial & Services
"We have been through the worst patch," CEO Allan Kilavuka said in an interview, noting passenger revenue had grown 21% in 2021 as a recovery started.
That helped the airline's loss narrow by a fifth during the first half of last year, but it still lost 11.5 billion shillings ($101 million) during the six months.
Aviation consultant Seabury was hired last month to advise on returning to profitability and its report is expected in the next three weeks,
Kilavuka said. "We are looking for a more efficient airline. The network should not lose money."
Cargo, which accounts for some 10% of revenue at Kenya Airways, performed well during the pandemic, he said. After passenger demand slumped the airline converted two passenger jets to carry goods.
The government is seeking to take over $750 million of Kenya Airways debt, which it had guaranteed in 2017, as part of the restructuring effort, Kilavuka said.
However it will still be dependent on direct government support in its fiscal year ending June 2022 and the following year, as Kenyan Finance Minister Ukur Yatani noted in December, underscoring the need for cost-cutting measures. read more
Kilavuka said efforts to turn around the airline would involve a critical look at staffing and the renegotiation of contracts with suppliers and plane leasing firms.