- The government continues to borrow heavily to service debt and starve the private sector of cheap and plentiful credit.
- President Kenyatta's form of economics (Uhuronomics) is called Keynesian economics.
We have gone from a period where debt inflows were building the country’s future, bringing about a sugar rush of development, to a time when suddenly money is only leaving the country to repay those loans and the benefits are yet to be felt. Projects are typically long-term in nature.
Loan-fuelled development has two stages: One, the initial feast as the capital investments create jobs and boost demand; and two, the repayment period where they ideally create a steady stream of revenue over years or even decades
Now what we are seeing is that the so-called development is not generating enough revenue to repay the parent loans.
Moreover, the aggressiveness was so intense that the private sector was sidelined and now the private sector is unable to take back the reigns from the government to generate tax revenue.
This is because the government continues to borrow heavily to service debt and starve the private sector of cheap and plentiful credit.
It is also because of the desperate, punitive and unpredictable tax and policy regime that affects investment decisions of entrepreneurs.
If the allegations are true that project costs were more beneficial to the tender winners and brokers than the taxpayers, then you see a consistent flow of money into real estate, boosting property prices and, combined with a massive infrastructure development spree, giving incorrect data to the construction materials factories to increase their capacity.
Then when the short term government channeled spending tapers off, the manufacturers are left with excess capacity and run into losses as the impotent private sector struggles to get back in the game.
President Kenyatta's form of economics (Uhuronomics) is called Keynesian economics.
This is the form of economics that requires the government to become the biggest source of demand by boosting debt-fuelled spending.
It was designed to bring back post-war economies with a bang. Now the problem is that the government used it in peace time, when the private sector was robust and healthy.
We are now realising that morphine is only appropriate as a painkiller for those who have been seriously injured.
The financial risk analyst spoke to the Star