We Are Screwed, We Must Pay China And Other Lenders, Ignore Ahmednassir, He Is Clueless

We Are Screwed, We Must Pay China And Other Lenders, Ignore Ahmednassir, He Is Clueless

By Empraim Njega

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 people’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?

Meanwhile Jubilee’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.


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