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Kenya Debt Watch
Scubidu
#1 Posted : Tuesday, March 23, 2010 5:11:35 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
Treasury over shoots its borrowing targets but says that borrowing was necessary to finance unplanned events; e.g., maize importation and power generation. Read the article below:

http://www.businessdaily.../-/15qtw7m/-/index.html

Interesting parts of the BD article:

Heavy borrowing by the government is usually associated with high interest rates that arises from the crowding out of the private sector from the debt market but analysts reckoned a combination of monetary policy actions and structuring of the debt has smoothened it out.

The failure of this heavy domestic borrowing to negatively impact on interest rates has been the subject of intense debate among analysts with some attributing the relative stability to the fact that a significant fraction of the debt is long term and has been put into investment as opposed to consumption.

“From July to March the cumulative expenditure on interest and other charges on domestic debt amounted to Sh39.5 billion compared with Sh31.9 billion in a similar period in the last fiscal year”, said CBK in its latest Weekly Bulletin.
At this rate, the interest payments is higher than development vote for the Ministries of Roads, Education, and Energy whose votes were Sh28 billion, Sh16 billion and Sh20 billion respectively.


From those three excerpts can we conclude that experts believe (1) private sector hasn't been crowded out (2) govt spending is not 100% recurrent (3) the cost of debt financing may not be sustainable (see post 43 & 59 in the CBK reduces rate thread). Some economists aren't worried by Debt to GDP levels (at ~40%) as they bank on higher revenues, economic growth, higher tax receipts...but what will keep this ratio depressed in the long run...lower inflation...they've done their homework.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Wa_ithaka
#2 Posted : Tuesday, March 23, 2010 6:09:25 PM
Rank: Veteran


Joined: 1/7/2010
Posts: 1,279
Location: nbi
Of it has crowded out private sector. A lot of the banks have refused to lend to the private sector and did so to GoK instead.
Even worse, most of this borrowing was done to finance non-income generating activities.
Secondly, the borrowing today will effectively impact future ability to borrow given the rising interest repayment.
Recurrent non-productive expending has increased-note we have 42 ministries and 4,000 commissions without any reductions elsewhere.
And ofcourse nobody has factored in the leakages via corrupsion et al
The Governor of Nyeri - 2017
kizee
#3 Posted : Tuesday, March 23, 2010 7:42:08 PM
Rank: Member


Joined: 1/9/2008
Posts: 537
this just in....CBR cut by 25 bps...very unexpected really cbk are hell bent on forcing banks to lend..maybe cbk shud advise theyr client-read GoK to stop overborrowing
Scubidu
#4 Posted : Wednesday, March 24, 2010 7:31:06 AM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
I also think they have crowded out the market, and BD has done a great article. I wonder how far the CBR will decline in future...if they were optimistic about economic growth, they may be worried about too low interest rates. Let's see how investors respond to the Tbond auction this month. I wonder if returns will be high enough to entice investors.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Scubidu
#5 Posted : Thursday, March 25, 2010 10:17:44 AM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
It seems govt will not stop overborrowing and should come clean on why private sector borrowing hasn't recovered...another record level of borrowing ~16b. What impact does this have on domestic debt? I wud like to see omo activity on the value date. Would the returns on a 15yr paper be attractive to you?-just under 10%. Check out auction results below:

http://www.centralbank.g...bonds/manualresults.aspx
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
guru267
#6 Posted : Thursday, March 25, 2010 11:27:32 AM
Rank: Elder


Joined: 1/21/2010
Posts: 6,609
Location: Nairobi
i dont think there is anything wrong or any worry with G.O.K over borrowing especially since most of the debt is reproductive and capital expenidture based...

if all the debt taken is put in the investment which it is meant for.. then i believe that the debt will pay for itself in the long term...
Mark 12:29
Deuteronomy 4:16
Intelligentsia
#7 Posted : Thursday, March 25, 2010 3:49:11 PM
Rank: Elder


Joined: 10/1/2009
Posts: 2,421
Traditionally GoK spending has been on recurrent expenditure in lieu of development expenditure...and most of the govt recurrent expenditure is used to pay the wage bill of a bloated govt and quasi-govt (read parastatals) bodies so leaving kidogo sana amts for R&D, infrastructure, Health (why we have a curative as opposed to a curative model),etc. On health what I mean is that our systems are geared towards curing diseases instead of preventing them. Plus zamani City Council used to spray stagnant amts of water in drainages, cut grass, etc to ward off disease-casuing mosquitoes. That is preventive. Nowadays, the bulk of poor folks just to go KNH (which is a referral hosi btw!)- that is, they go there for a cure (thus curative model). The bottom-to-top hierarchy should be dispensaries, district hospitals, provincial hospitals and then referral hospitals of which KNH is the main one. Yaani u go to KNH because all the rest were unable to treat your problem.
But guys flock to KNH because of failure of these other smaller health units. Ergo, the overcrowding at KNH is a symptom of too much of our budget spent on recurrent expenditure instead of developing say, our health infrastructure, leading to collapse of some dispensaries and drug stocks outtages at NCC dispensaries, district and provincial hosp.

In fact Mwalimu Mati's Mars Group observed that only 15% of our national income goes the development kitty (where a lot is pilfered on the way anyway, meaning even less reaches the intended beneficiaries)- this in a country where 80% of the folks are poor...
http://blog.marsgroupkenya.org/?p=119

Be that as it may, I was thrilled to bits when they allocated a good chunk of the budget in 2008 to the modernisation of the armed forces. About time! Yes we may moan about we are not at war, that health and education and all that have been neglected but a strong force is a deterrent force in an increasingly dangerous neighbourhood some with expansionist ambitions. Plus the last time our armed forces bought quality materiel (jet fighters/ Vickers tanks,etc) was 32 years ago! In 1978 to be precise. And now, even Tz has 6 of the more sophisticated Mig -29 Fulcrums!

Caveat: So long the money is not invested in junk aircraft or stolen...



Much Know
#8 Posted : Thursday, March 25, 2010 5:01:36 PM
Rank: Elder


Joined: 12/6/2008
Posts: 3,435
@scubi, all government paper including cash represents credit(gova borrows and not guarantees on gold holdings etc as some would want) . i think when the governor spoke, he made it clear that he was forced to spend because of
1. Maize imports
2. Emergency Power generators.
In other words he was asking economist, now that we have good rains, what do you expect? A government bond can be used to mop up liquidity as well as to allow government to spend when the public is not borrowing to encourage public borrowing and investment. The goverment may also translate economic gains into print which was the desparate governors erstwhile only option. Its my opinion that the gova is indeed indicating its control on the shilling through this move averting fear of inflation especially given recent economic gains where it was busy converting gains to cash 'to pay for maize and generators'. If oil is found tomorrow, it will issue bonds and cash even more liberally on obvious gains ahead(dont worry am also confused by what i am writing)
A New Kenya
Wa_ithaka
#9 Posted : Thursday, March 25, 2010 7:45:30 PM
Rank: Veteran


Joined: 1/7/2010
Posts: 1,279
Location: nbi
much know-your last line made sense
The Governor of Nyeri - 2017
Scubidu
#10 Posted : Thursday, March 25, 2010 8:19:14 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi

@guru267. Yup, ur right. I understand borrowing for stimulus spending, but I think the past auction wasn't stimulus, so I wonder if they'll be just as accountable. You don't talk much about the macro trends in Kampala...any gud UG vibe?

@Intelligentsia. Those are excellent examples... water situation, I remember they had to drain some dam sometime ago to repair it, I wonder how much could have been saved if these long term plans were set in motion to manage the water dams, even forests (glad most r being fenced). same thing with the power deficit...reactive rather than proactive policy...they need IPPs to swoop in quickly to build infrastructure b4 the 2012 elections...interestingly I looked at my power bill again for February, KPLC is charging 674 cents per kwh for fuel cost adjustment, a friend of mine got 783 cents (guess I'm the lucky 1...but 674 is about the same level they were charging six months ago b4 Aggreko ep)... they're spending on food imports but I don't know how much money has gone into developing new food reserve crops, ones that can be stored, other than maize/wheat somehow (don't know if possible) more resistant to drought conditions...I mean how do the Israeli guys farm stuff in the desert...I don't know but there must be away to avoid this, irrigation methods, isn't that what uni's like JKUAT are all about, being proactive. but how u know so much about armed forces, what's a Mig-29 Fulcrum? Dude I wasn't alive 30 years ago but wud be interested in the kind of fire power our armed forces have now. Last time I saw them wheeling tanks through our country, it caused an uproar.

@much know. u have a way with words. I don't think I make sense half the time either, ... what if the private sector recovers, economic gains continue, they start borrowing huge & govt finally spends stimulus will cbk's tools be sufficient enable them to avert inflation...u said they're using the govt bond to mop up liquidity, so wud that mean to mop up further liquidity they'll need to issue more bonds, or suspend spending (temporarily) on projects already committed to. Looks like the power generators will be used less in the following months and the maize shortage in April will be allievated in time, but what will we be stick with us...all these govt bonds, of which GOK can only afford to pay interest.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
guru267
#11 Posted : Friday, March 26, 2010 7:02:54 AM
Rank: Elder


Joined: 1/21/2010
Posts: 6,609
Location: Nairobi
@scubidu uganda's economy is still EXTREMELY SMALL and very DISORGANIZED when compared to kenya so both the debt and capital markets here are very illiquid... i mean we are still using share certificates and (there is a 30% capital gains tax)...

just to show the extent of how small the economy is.. as kenya auctions bonds worth kshs10billion uganda auctions an average amount of ushs10billion(kshs 380 million) all for recurrent expenditure....

the inflation rate is poorly calculated and yet it is still above 10% and lets not even go to the unemployment... the official rate is around 18% but it does not include the around 70% of the population that is in informal business(INCOME TAX EXEMPT)...

the nature of the government(military democracy) also presents large amount of risk since there is no clear sight of democratic change and the constitution is completely meaningless...

if one visits Kampala they would see the disorder i am talking about...
Mark 12:29
Deuteronomy 4:16
Scubidu
#12 Posted : Friday, March 26, 2010 8:59:45 AM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
Rate on Tbill is now 5.748%. Let's look out for the reverse repo rate over the next two weeks...it's currently at 2%, but by 29th March, 2010, I bet it will be lower. Check out the Tbill auction results below:

http://www.centralbank.g...ills/manualresults.aspx

I'm still surprized at the amount of money was attracted to the auctions. Both the Tbill and Tbond this week were oversubscribed raising a combined 44.5b [30.3+14.2] in bids with 21.5b [16.6+4.9] in new borrowing (with absolutely zero redemptions). At current exchange rates that's $279 mn in new borrowing in one week...huge numbers. They have only spend 4b of the 22b stimulus spending, what about the above funds;not including the 16.2b ($210 mn) from the IFRB3 last month.

Stumbled on an interesting blog where the blogger tries to measure the level of productivity for each new level of debt added into the system; i.e., he charts productivity based on the debt incurred vs the economic gains that debt generates. I wonder if we can do the same for Kenya...chart quarterly GDP movements to growth in public debt (I'm sure the info is available online to do this). Read more below:

http://fedupusa.org/2010...nt-chart-of-the-century/
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Intelligentsia
#13 Posted : Friday, March 26, 2010 10:51:14 AM
Rank: Elder


Joined: 10/1/2009
Posts: 2,421
@scubidu - to answer your earlier question: the Mig-29 is a high performance combat aircraft made in Russia. West's equivalent is th F-16 fighter.
Scubidu
#14 Posted : Monday, March 29, 2010 7:19:15 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
Taking a historical perspective to further understand the Kenya’s debt can put talking points into a better context. Economists often quote the public debt to gdp ratio, in our case ranged roughly between 30-60% since 1980. In 1980s the debt to gdp was ~35%, peaking at 96% in “Goldenberg” 1993 before falling to current levels of 44%. Public debt, owned by us Kenyans are either external or internal. Let’s have a look at the changes in Kenya’s debt owed to foreign creditors over the last 50 yrs:

1960: 1 billion
1970: 2 billion
1980: 10 billion
1990: 68 billion
2000: 363 billion
2010: 525 billion

During the independence years the bulk of public debt was external; over time, foreign debt as a % of public debt has fallen from 72% in 1990 to 48% in 2010 as Kenya's bond market developed. Factors like IMF aid freezes in the 1990s and govt policy changes regarding foreign aid in budgets also impacted the debt structure. Since 2008 external debts have largely risen due to revaluation losses and small multilateral loans. The changes in Kenya’s debt owed to domestic creditors are below:

1960: 0.4 billion
1970: 1.2 billion
1980: 7 billion
1990: 27 billion
2000: 207 billion
2010: 613 billion

Domestic debt growth has accelerated since 2000 highlighting the exponential nature of public debt growth. For example, in the first 30 years of independence to 1990 domestic debt grew by only 27 bn, 10 yrs to 2000; 180 bn, 10 yrs to 2010; 407 bn, 2010-2020; ? bn. Interestingly expansion of domestic debt since 2008 has been 181 bn that accounts for 30% of those generated over the last 50 yrs; Throwing another stat into the mix-govt debt dished out from 2008 comprises ~16% of all public debt since 1960.

Looking at the trends over the last 15 years we uncover the key drivers of domestic debt. As at June 1996 Tbills and Tbonds outstanding were 78 bn and 9 bn respectively; By March 2010 these figures have risen to 155 bn and 424 bn. The domestic debt to gdp ratio has remained fairly flat at 22% from 2003 to 2010, but domestic interest paid (by GOK) as a percentage of ordinary government revenue (collected by KRA) has risen from 9.1% to 12.5% from 2003 to 2010. This may seem marginal, but one must remember KRA collects more each year (+15% pa), so this can only make sense when measured against other budgeted govt expenditure (see BD article reference in post 1).

This debt creation helps maintain Kenya’s deficit spending and the 10yr trends above begin to support the theory that today’s debt is only a fraction of what they’ll be in 2020. This easy to follow lesson in our history is widely understood and brings to light the reason why the Kenya’s economy must grow forever if it’s to survive.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Wa_ithaka
#15 Posted : Tuesday, March 30, 2010 7:30:17 AM
Rank: Veteran


Joined: 1/7/2010
Posts: 1,279
Location: nbi
In some respects, the debt would not be an issue if it was for example to finance infrastructure to enable the economy to gorw. Most of ours is to finance fighting equipment bought in the world's equivalent of Gikomba market in the evening.
And to finance recurring govt spending that is not really adding value like 42 ministries.
The Governor of Nyeri - 2017
Scubidu
#16 Posted : Tuesday, March 30, 2010 10:58:35 AM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
I'd be interested to know how much it wud cost to implement the new ministries under the proposed draft as well as the devolved units...will there be savings from scraping the provin. admin, but just how much. Will we have to buy these new gov bureaucrats passats? or maybe motorbikes like the Chiefs (was that ever done?) there's nothing stopping them from promoting big govt, big expenditure, as long as they have the means to finance it...it would be good if they spent money on infrastructure, though seems even when they do have the money, spending is more of a challenge than sourcing it, strange.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Scubidu
#17 Posted : Tuesday, April 06, 2010 9:11:25 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
You need but download a monthly economic review to see GDP measured in 3 ways: GDP at Basic Prices, GDP at Market Prices (Current Prices), GDP at Market Prices (Constant 2001 Market Prices). When economists observe GDP growth they refer to GDP (Constant 2001 Market Prices) but when they refer to debt to gdp ratio they refer to GDP (Current Market Prices).

We can track the normal debt to GDP ratio for the last five years using GDP (Current Market Prices):

2004 - 58%
2005 - 53%
2006 - 49%
2007 - 46%
2008 - 46%

These are the numbers we're used to. However, if we use the GDP (Constant 2001 Prices) we see slightly different ratios.

2004 - 66%
2005 - 63%
2006 - 63%
2007 - 63%
2008 - 71%
2009E - 80%

IMF economists will often refer to gdp to debt ratio to evaluate a country's borrowing profile and it would indeed show that when using GDP (Constant 2001 Prices), this ratio suddenly varies in 2008/09 from the previous years (the '09 GDP growth assumption was 2% which was the IMF estimate). Govt debt created (public debt) can be spent unproductively or not spent at all (appears the latter is the case now). So is there a way to gauge the productivity of Kenyan debt (it was alluded to in post 12). We can look at the annual change in public debt vs GDP (Constant 2001) & produce a productivity factor based on the changes. The results from 2001 are below:

2001 - 6.0
2002 - 0.2
2003 - 0.4
2004 - 2.2
2005 - 8.1
2006 - 1.5
2007 - 1.7
2008 - 0.2
2009E - 0.2

This is how the ratio is interpreted. In 2001, for every Ksh100 of public debt created by the govt about Ksh600 of GDP (revenue) was generated (have a look at the article in post 12). We are using GDP (Constant 2001) because we can apply the growth projections to those figures, e.g., 2% for 2009 and 3% for 2010 (according to IMF). So u'll notice that in 2002, 2008, 2009 for every Ksh100 of debt only Ksh20 of GDP revenue was generated proving that debt productivity is low because of low GDP growth (and unspent stimulus funds).

In order for 2010 productivity factor to be 1.0 govt should only raise public debt by Ksh 43 billion in order to match a growth in GDP of 3%. In the first quarter of 2010 we can estimate that public debt is already up Ksh 27 billion meaning that govt shouldn't borrow more than Ksh 16 billion over the next nine months. This means that the deficit financing largely through domestic borrowing should not be higher than ~3% of GDP vs 6.6% for 2009/10. Isn't this the way the govt should rationale...for every Ksh100 they create in debt they should at least match it with Ksh100 in GDP growth.

Optimistic GDP forecasts from fund managers are as high as 4.5% for 2010 and this should allow public debt to swell by about another Ksh 38 billion from current levels (deficit financing ~2.6% of GDP). But 4.5% GDP growth seems a stretch. You'll notice I'm only focusing on domestic debt and not external debts, those foreign loans for energy (for example). <Note: You can run all the above scenarios using data from monthly economic reviews and budget speech estimates>
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Scubidu
#18 Posted : Thursday, April 08, 2010 8:14:59 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
The just issued monthly economic review for February 2010 brings with it interesting data that we can use to further our discussion of Kenya's debt situation. You can download the document from the CBK website under the 'monthly economic review' menu.

http://www.centralbank.g...ions/mer/2010/Feb10.pdf

Interestingly the CBK has revised its estimates for the debt to gdp ratio (we covered that in the previous post above). On page 40 suddenly debt to gdp ratio has risen from 44.5% to 53.6%...note Kenya's GDP is ~Ksh 2.2 trillion so a 10% revision upwards in this ratio would be pretty substantial. So now the question is what was understated and what was overstated? Public Debt or our GDP...Public Debt is unlikely to have been understated because external debt remained unchanged and Treasury knows all the domestic debt it creates...extremely puzzling. But it does shed more light on why (in the post above) according to govt stats debt to gdp ratio stayed flat from 2007 to 2009 at 46%.

Page 44 of the cbk document states the following...
Cumulative government expenditure on interest and other charges on domestic debt increased from Ksh 30.5 billion in the first eight months of fiscal year 2008/09 to Ksh 38.9 billion in a similar period of the fiscal year 2009/10. The external debt service in the period comprised Ksh13.6 billion in principal repayments and Ksh 4.1 billion in interest payments.

They usually give us the ratio (Percentage of domestic interest in ordinary Government revenue); last month it was 12.9%, but looks like we'll have to calculate it ourselves. Tax revenues were about 350.7 billion, so the ratio is lower at ~11.1% while total debt repayments are ~16.1% of Kenya's tax revenues. This is a significant improvement from the previous month, but is this due to lower interest rates or higher tax receipts? We'll not know for sure, but one thing we do know is that domestic interest payments on Kenya's debt is growing by 27.5% pa vs 10.0% pa for tax receipts, which should not be a problem.

The last tit-bit (unfortunately unrelated to debt) is the balance of payments, on page 24. So if you wanted to know the changes in balance of payments from December 2008 to December 2009, too bad, I guess...cbk thot that wasn't important (considering they're end year figures) and is particularly enraging because in the previous report the 'Monthly Economic Review for January 2010', the guys at CBK specifically said "DATA FOR DECEMBER ON BALANCE OF PAYMENTS ARE NOT AVAILABLE. WILL BE INCORPORATED IN THE FEBRUARY 2010 ISSUE"...I guess they left out CYKE!!!
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Scubidu
#19 Posted : Friday, April 09, 2010 9:47:20 AM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
Crucial in this day and age to check and double check. On closer inspection of the latest review it may appear that the figures for the debt to gdp ratio may have just been a typo and that indeed the ratio is still at 45% (CBK should be more careful b4 releasing monthly statements).

Using the 45% ratio and the public debt figure for Dec 2009 we can infer that GDP (Current Market Prices) was about Ksh 2.4 trillion. This is useful but presents some more puzzles. This gdp growth in 2009 represents a 17% y-o-y vs 15% in 2008; curiously this rate of growth was the highest rate of growth (in both percentage and nominal amounts) since 2001 (2008 ranks 2nd);

However, GDP (Constant 2001 Prices) paints a different picture suggesting that 2007 was the best performing year since 2001. There is an obvious disconnect between reality and GDP (Market Prices) as 2008 and 2009 were supposedly years in which Kenya suffered an economic downturn but the stats above suggest otherwise. Just what does GDP (Current Market Prices) measure?

Tricky thing stats are because using one set of statistics based on GDP (Current Market Prices) suggests debt to gdp ratio has fallen from 59% in 2001 to 45% in 2010 while the same set of stats based on GDP (Constant 2001 Prices) suggest that the debt to gdp ratio has risen from 59% in 2001 to 80% in 2010. Which one is more accurate? and Relevant?

Three months have past since the last estimate of quarterly gdp growth, I'm sure by now the CBK has a fairly good idea of what economic growth in 2009 was. Let's hope they exceed our expectations.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
Scubidu
#20 Posted : Sunday, April 11, 2010 7:12:07 PM
Rank: Veteran


Joined: 9/4/2009
Posts: 700
Location: Nairobi
Finance Minister Uhuru Kenyatta estimated that the total fiscal deficit will amount to Ksh 168.2 billion on page 21 of his budget speech, which he estimated was roughly 6.6% of GDP (page 6). This implies he was looking at GDP rising to Ksh 2,548 billion (168.2/0.066).

Based on public debt level of 1,053 billion and the debt to GDP ratio of 44% as at 30 June 2009 when he read his budget speech we can infer that GDP at Jun-09 was about Ksh2,395 billion. This would mean Uhuru estimated GDP would rise by 6.4% from Jun-09 to Jun-10 (the budget period). Most like he was referring to either GDP Basic or Current prices. In the post above we estimated GDP (Current Prices) at 2,471 billion as at Dec-09.

Using simple calculus we can look at six month changes in GDP from Jun-09 to Dec-09 and expected GDP growth from Dec-09 to Jun-10.

Jun-09 to Dec-09 = 2,471 billion - 2,395 billion = 76 billion
Dec-09 to Jun-10 = 2,548 billion - 2,471 billion = 77 billion

Isn't that interesting the rate of growth is almost the same in both six month periods. Is that accurate? Is it too convenient.

Well Uhuru projected that the financing requirement would be Ksh 109.5 billion to financed through domestic borrowing. He has surpassed that target in 9 months. Domestic debt is up from Ksh 518.5 billion in Jun-09 to Ksh 639.3 billion today (a change of 120 billion).

He expected GDP to rise by Ksh 156 billion (77*2) from Jun-09 to Jun-10 and we can see that growth in domestic debt alone has reduced estimated debt productivity to 1.3 (i.e., for every Ksh100 in domestic debt Ksh130 of GDP is created). However, if you take into account public debt then productivity is marginally higher at 1.4. Let's hope that Uhuru can meet all his targets.
“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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