Economics 101 by Mohamed Wehliye.
1. Your Excellency Uhuru Kenyatta- We can’t compare our debt/gdp ratio to that of Japan. Different countries have different tipping points when it comes to debt. Japan is a wealthy nation. Their 200% debt/gdp is our 50. Japan is one of our big creditors. Sisi we can lend to who?
2. Japan’s debt is mostly in ¥¥¥, a global & liquid currency & is held by its own citizens. It can adjust interest rates at low levels so that repayment values stay low relative to the overall debt level. Its interest rates are negative ie they borrow 100 & repay 99. More than 50% of ours is in foreign currency. Slight macroeconomic turbulence & BOOM!
3.This is an argument I have seen used also by politicians & surprisingly by Treasury mandarins who should know better. You can’t compare our debt/gdp ratios to the US, Japan etc ones. US has reserves of over $3 trillion. Japan over $1.2 trillion. Both $ & ¥ = reserve currencies.
4. Japan’s foreign currency reserves is at $1.3 trillion. Kenya’s GDP is $80 billion. With their reserves only, they can buy all the goods and services produced in Kenya for the next 15 years.
5. Japan’s currency depreciates, they win big time. For every 1 shilling ours depreciates, we add Ksh 26 billion to our debt.
6. Ni kama ku compare my debt/wealth ratio na debt/wealth ratio ya my wealthy friend Wangathika Thuu of King’eero. He is AA+ rated na mimi ni junk. His debt is in highly sought bonds held as liquid assets by investors & mine is either held by speculators looking for high yields or is bank loans. He is a net creditor & I have no body who calls me a creditor.
7. If Japan & USA are our benchmark re debt/gdp ratio, then we are headed for a disaster!
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It is embarrassing that Uhuru doesn’t get such basic facts, looks like our president can only speak good english and Swahili beyond that, he is a zero.
