By Empraim Njega
THE IDEA THAT WE CAN DEFAULT ON OUR DEBT IS PEDESTRIAN AND SIMPLISTIC SLOGANEERING
I have seen some people advancing an argument that we can simply default on our debt as a way out of the current crisis. This is wishful thinking and simplistic argumentation.
I guess these views are driven by the perception that China is responsible for our debt problems. China at the moment only accounts for 11% of our total public debt. Even if we were to default on debt to China we would still be owing KShs 4.5 Trillion and counting.
Half of our debt is domestic debt owed to Kenyans, that is KShs 2.5 Trillion. How do you default against yourself? The entire financial system would collapse.
Is it a just argument to argue that you can borrow peopleâ€™s money, waste it and then refuse to pay?
Over 30% of our external debt i.e. KShs 906 Billion is owed to foreign commercial banks. Even a hint of default would see dire consequences on the economy. The shilling would plummet making our external debt blow out of control.
We owe KShs 2.5 Trillion (USD 25 Billion) in foreign debt. A depreciation of the shilling by ten shilling to the dollar would see the debt grow by KShs 250 Billion without borrowing an extra shilling. If the shilling were to depreciate to KShs 150 per dollar our external debt would immediately rise to KShs 3.75 Trillion i.e. an extra KShs 1.25 Trillion without any borrowing.
What then would be the point or rationale of defaulting on debt only for the economy to collapse? Who would be foolish enough execute that idea?
Under international law African countries are under NO legal obligation to pay back a cent of Chinese loans. China induced African leaders through bribes/kickbacks to sign loan agreements under unfavourable terms to Afican countries but favourable inducements to African leaders.
â€” Ahmednasir Abdullahi SC (@ahmednasirlaw) September 11, 2018
Let us get one thing clear on the Chinese loans & why African politicians are MADLY in love.Due to legislation, American and EU companies CANNOT bribe or give 10% kickbacks when tenders are awarded. Chinese companies who are state owned give 10 to 30% bribe once tender is awarded
â€” Ahmednasir Abdullahi SC (@ahmednasirlaw) September 12, 2018
Am in agreement with my friend Ahmednasir Abdullahi that Kenya & all African Countries have no Legal Obligation to repay China. China Loans factor bribes for African Leaders & Mandarins . Such contracts are VOID & fall under Law doctrine of Ex turpi causa non oritur actio.
â€” Donald B Kipkorir (@DonaldBKipkorir) September 12, 2018
Meanwhile Jubileeâ€™s flagship project is in trouble, the SGR has not in anyway been beneficial in the logistics of getting containers to inland East Africa;
While we were told SGR would bring efficiency and lower transportation costs it is actually causing unimaginable losses. The Business Daily reports that importers are losing KShs 70 Million daily due to congestion at the Inland Container Depot (ICD) in Nairobi. This would translate to a loss of KShs 26 Billion annually.
It is also claimed that the cost of transporting containers has not reduced under the SGR regime. The quoted SGR costs do not consider last mile transport cost from the ICD to client and return of the container to Mombasa.
While the SGR promises transporting goods from Mombasa to Nairobi in eight hours, goods are taking weeks to clear at the ICD resulting in high demurrage charges. Government agencies have reduced the process of clearing goods into a Tower of Babel.