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Kenya's economic crisis exposes debt burden amidst increasing Chinese influence
International desk
02 Jul 2024, 22:06
Photo: Collected
East Africa's Kenya experienced widespread violent protests last week during which at least 19 people lost their lives.
The Kenyan debt crisis underscores the challenges faced by many African nations in balancing development goals with financial stability.
Kenya, known as East Africa's one of the more economically developed and politically stable countries, experienced protests where demonstrators expressed their anger against President William Ruto, demanding his resignation due to the introduction of the Finance Bill 2024, which included tax hikes, Ruto temporarily suspended the controversial tax bill in response to public outcry.
According to a report by USA-based Vox media, Kenya's total debt amounts to USD 80 billion, comprising both domestic and foreign debt. This debt represents 68 per cent of Kenya's GDP, exceeding the World Bank and IMF recommended maximum of 55 per cent.
With the withdrawal of the Finance Bill, President Ruto needs to outline new measures to address the debt crisis. He has mentioned austerity measures but must strike a balance between meeting the needs of the Kenyan people and satisfying the country's creditors.
The crisis was triggered by the Kenyan government's attempt to pass an IMF-backed finance Bill that proposed increasing taxes on various goods, including imported sanitary pads, tyres, bread, and fuel. The Bill aimed to raise an additional 200 billion Kenyan shillings (approximately USD 1.55 billion) to service the country's debt.
Most of Kenya's debt is held by international bondholders, with China being its largest bilateral creditor, owed USD 5.7 billion. Kenya's debt situation stems from heavy borrowing to finance infrastructure projects. The country has borrowed from multinational lenders like the World Bank and IMF, as well as bilateral partners such as China. The COVID-19 pandemic and the Ukraine war further exacerbated the situation, leading to increased expenses and a spike in global food and energy prices.
The issue of debt has sparked international scrutiny, with Washington frequently accusing Beijing of engaging in "debt trap diplomacy" through its infrastructure investments under President Xi Jinping's Belt and Road Initiative. China, however, denies these allegations.
Kevin P Gallagher, director of Boston University's Global Development Policy Center, highlighted the lack of a well-functioning global financial safety net as a significant factor contributing to Kenya's debt challenges.
Aly-Khan Satchu, a Kenya-based economist quoted by Voice of America, described Kenya as being in a "perfect debt storm," noting shifts in Kenya's geopolitical alignments and efforts to reduce dependency on Chinese financing with support from the World Bank and IMF.
However, Satchu also pointed out challenges arising from Kenya's need to allocate IMF and World Bank funds to repay debts owed to China, particularly related to infrastructure projects like the Chinese-built railway.
The Sunday Guardian cited Paul Nantulya from the Africa Center for Strategic Studies, who highlighted China's substantial role in financing and building infrastructure across Africa.
Concerns arise when African countries struggle to repay these loans, potentially leading to asset seizures by China. Countries like Zambia and Ghana defaulted on their payments and subsequently reached agreements with their creditors to restructure their debt. These cases highlight the need for a balanced approach to debt management and economic stability.
Kenya's economic and political landscape remains fraught with challenges as it navigates its debt burden and seeks to manage its international relationships effectively. A collaborative approach involving fair taxation, debt restructuring, and international support is essential to navigate this crisis without further burdening the population.
Source: Daily Hunt
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China’s Stimulus Plan Disappoints
China’s recent stimulus plan has left many analysts and investors underwhelmed, as it falls short of addressing the deep-rooted economic challenges facing the country. Despite hopes for a robust package to revive growth, the measures announced have been seen as insufficient to tackle issues such as sluggish consumer spending, mounting debt, and a faltering property market.
The plan includes modest tax cuts, increased infrastructure spending, and support for small businesses, but critics argue that these steps lack the boldness needed to spur significant economic recovery. Additionally, the plan’s limited scope has raised concerns about the government’s commitment to structural reforms and long-term economic stability. As a result, market reactions have been tepid, with stock indices and investor confidence showing little improvement. The disappointment surrounding the stimulus plan underscores the complexities of navigating China’s economic landscape and the challenges of implementing effective policy measures in a rapidly changing global environment.
China’s economic planning agency unveiled new measures to boost the economy yesterday, but avoided major spending initiatives. The incremental approach seemed to disappoint investors, who had hoped for more ambitious actions. As markets reopened after a weeklong holiday, the Shanghai Composite Index initially surged by 10 percent but settled 4.59 percent higher. Meanwhile, Hong Kong’s Hang Seng Index plummeted by 9.41 percent.
Chinese National Development and Reform Commission Chairman Zheng Shanjie announced that the government would advance 100 billion yuan (US$14.2 billion) from next year’s budget, along with an additional 100 billion yuan for construction projects. This spending level fell short of the multitrillion yuan expectations analysts had predicted. Zheng affirmed that China remains on track to achieve its annual economic growth target of around 5 percent, despite facing significant challenges and a more complex global environment. UBS chief China economist Wang Tao noted that the market had anticipated a substantial fiscal stimulus. She suggested that a modest package of 1.5 trillion to 2 trillion yuan is more realistic in the near term, with an additional 2 trillion to 3 trillion yuan expected next year.
Late last month, China introduced a monetary stimulus package that included reductions in mortgage rates and the reserve requirements for banks. These measures represent the most aggressive efforts to date to revive the struggling property sector and accelerate economic growth. The commission emphasized that the new policies aim to boost investment and spending, and provide support to small and medium-sized enterprises that face challenges compared to large state-owned corporations. However, much of the announcement centered on technical details such as, payment regulations, project management, and the issuance of bonds for financing.
Chinese consumers may soon face higher prices for Remy Martin and other European brandies after the government announced provisional tariffs ranging from 30.6 to 39 percent on these liquors. This decision comes just four days after most EU countries imposed duties on China-made electric vehicles (EVs). The retaliatory move could provide Chinese negotiators with leverage in discussions with the EU to reduce or eliminate the tariffs of up to 35.3 percent on Chinese EVs, set to take effect at the end of this month. The brandy tariffs are provisional, requiring importers to deposit the tariff amount with Chinese customs starting Friday. This announcement follows a preliminary finding by the Chinese Ministry of Commerce in late August, which concluded that European brandy was being dumped in China, causing “substantial damage” to domestic producers.
The brandy investigation primarily targeted French producers of Cognac and similar spirits like Armagnac. France has backed the probe into Chinese-made EVs, while Germany, concerned about potential retaliation in the Chinese market, has opposed it. The provisional tariffs vary by brand, akin to the EU duties on Chinese EVs. For instance, Martell faces a 30.6 percent tariff, Remy Martin 38.1 percent, and Hennessey 39 percent. These tariffs affect dozens of companies, including some Spanish producers. China’s economic future appears uncertain and challenging in light of its recent stimulus plan. The measures introduced, which include modest tax cuts and increased infrastructure spending, have been criticized for their lack of boldness and inability to address the deeper issues plaguing the economy. With consumer spending remaining sluggish, mounting debt levels, and a struggling property market, the stimulus plan falls short of providing the necessary boost for a robust recovery.
Additionally, the limited scope of the plan raises doubts about the government’s commitment to implementing structural reforms that are crucial for long-term economic stability. As a result, investor confidence has waned, and market reactions have been tepid, reflecting the broader skepticism about the effectiveness of the stimulus measures. Without more comprehensive and aggressive policy interventions, China faces a bleak economic outlook, with the risk of prolonged stagnation and increased financial instability looming on the horizon.
Philippines: Cyclone Kristine Leaves More Than 20 Dead
A severe tropical storm in the Philippines unleashed widespread flooding and landslides that killed at least 24 people, according to local authorities Thursday.
More than 150,000 people have been forced to flee their homes after Tropical Cyclone Kristine — known locally as Tropical Storm Trami — made landfall on the country's main island of Luzon in the northeast of the archipelago.
Drowning and landslides, the cause of most deaths
Kristine made landfall near the town of Divilacan in Isabela province. Schools and businesses in the path of the weather system were ordered closed.
According to the National Weather Service, the eye of the storm was passing over the Ilocos region north of the capital Manila at around 2 p.m. (0600 GMT) on Thursday with maximum sustained wind speeds of 95 kilometers (59 miles) per hour.
Most of the deaths from the storm over the past few days were due to flooding and landslides in the central Bicol region, southeast of Manila, including Naga City.
"We have 20 dead [throughout the Bicol region]," regional police chief Andre Dizon told reporters on Thursday, adding that the final figure was yet to be finalized.
Villages submerged, rescue operations underway
Members of the Philippine Coast Guard and the military were involved in rescue operations in affected areas.
Around 1,500 police officers have also been deployed for disaster mitigation work, Dizon said.
Thousands of villagers who were trapped in flood waters have been rescued by government forces, however, many more needed to be saved on Thursday in the Bicol region, including some on roofs.
"We can't rescue them all at once because there are so many and we need additional motorboats," Dizon told The Associated Press.
"We're looking for ways to deliver food and water to those who were trapped but could not be evacuated right away."
The weather service warned of heavy to intense rainfall, flooding and landslides and storm surges for areas in the north.
The Philippines on average experiences around 20 tropical storms annually which often result in heavy rains, strong winds, and landslides.
Taiwan 'Will Not Yield an Inch' of Land, Lai Says
Taiwanese President Lai Ching-te on Friday said that Taiwan would not give up an inch of its territory as he visited the Kinmen islands off the coast of China.
Lai was speaking at an event marking the 75th anniversary of the victory over communist forces in the Battle of Guningtou that saw the Kinmen and the Matsu islands fall under the control of Taiwan.
What Taiwan's president said
"(We) will not yield an inch of ground in Taiwan, Penghu, Kinmen, and Matsu to firmly defend our homeland," Lai said during an address in which he referred to the islands controlled by Taipei.
"The Battle of Guningtou lets us understand that democracy and freedom should not be taken for granted, but require the joint efforts of generations to defend them," Lai said.
Lai did not name China by name but said that "any external forces" would not be allowed to change the future of the islands.
Taiwan's leader told veterans and family members that the October 1949 Battle of Guningtou "represents our determination to protect our country."
China sees democratic Taiwan as its territory and maintains that the use of force to bring the island under its control is not off the table.
The Kinmen and Matsu islands
The Kinmen and Matsu islands lie close to China's coast but are under the control of Taipei.
They've been under the control of Taiwan since the defeated Republic of China government fled to Taipei in 1949 after losing a civil war with Mao Zedong's communists.
The Kinmen battle was a rare victory for Chiang Kai-shek's forces in the closing days of China's civil war.
Kinmen is home to a large Taiwanese military garrison and Taiwan's coast guard patrols its waters.
China conducted military exercises around Taiwan earlier this month which it said were a warning to "separatist acts."
Israel's Attack: All Flights from Iranian Airports Suspended
In the wake of airstrikes by Israel, all flights from Iranian airports have been canceled, according to a report by Reuters citing Iran’s state news agency IRNA.
A spokesperson for Iran's Civil Aviation Authority stated that flights on all routes have been suspended until further notice. It remains unclear when flights will resume.
Israeli media reported that Israel has also announced the closure of its airspace until 8:30 AM local time on Saturday, October 26.
Following Israel's attack on Iran, Iraq temporarily closed its airspace as well. According to Al Jazeera’s live report, Iraq’s Ministry of Transport has suspended all air travel at the country’s airports until further instructions are given.
On Friday night, the Israeli military issued a statement saying, “In response to attacks by Iran over the past few months, the Israel Defense Forces are currently carrying out targeted strikes on Iranian military installations.”
The United States has confirmed the Israeli strikes. National Security Council spokesperson Sean Savett said in a statement, “Israel is conducting precise strikes on various Iranian military sites for self-defense. This is in response to Iran’s attack on October 1.”
Israel Announces End of Attacks on Iran in Face of Resistance
Israel retreated to Iran's resistance. Iran's defense forces claimed to destroy Israeli drones in the air. Israel has announced that the attack on Iran has ended. BBC News.
Israel Defense Forces spokesman Daniel Hagari said Iran's response to the attack on Israel was "complete". We have conducted targeted strikes against military targets in Iran.
He warned in a message on social media that if Iran retaliates, Israel will be forced to respond strongly.
Meanwhile, Iran said it repelled the Israeli attack. Israeli drones have been destroyed in the air.
Earlier, Israel attacked Iran in the early hours of Saturday (October 26). Large explosions were heard in Iran and the neighboring city of Karaj. Iran's air defense system was launched at this time.
After the Israeli attack, Iran's official news agency IRNA reported that the country's defense forces had successfully destroyed enemy targets in the airspace around Tehran. In addition, another Iranian media outlet quoted officials as saying that Tehran is ready to respond to Israeli aggression.
A few weeks after Iran attacked Israel on October 1, Israel retaliated. Iran fired about 200 ballistic missiles at Israel in response to Israel's inhumane attacks on Gaza and Lebanon and the killing of Hamas and Hezbollah leaders.
19 Killed in Passenger Bus Accident in Mexico
At least 19 people have died in a passenger bus accident in Mexico.
The accident occurred on Saturday, October 26, on a highway in the central state of Zacatecas.
According to a CNN report, a tractor-trailer carrying corn crashed into the rear of the bus, causing it to lose control and plunge off the road.
Initially, authorities reported 24 fatalities, but the number was later revised to 19. Six injured passengers were taken to a hospital for treatment.
The bus was traveling toward Ciudad Juárez, a city in the border state of Chihuahua, but no migrants were among the victims.
The driver of the tractor-trailer has been arrested, and police have launched an investigation.
Road accidents are unfortunately common in Mexico. In December 2021, a tragic truck accident in Chiapas province killed 54 people, with the vehicle carrying around 166 passengers.
Tropical Storm Trami Claims 126 Lives, Hundreds Missing in Philippines
Tropical storm Trami has caused severe flooding and landslides in Philippines, leaving at least 126 people dead or missing, according to the government's disaster-response agency. President Ferdinand Marcos said on Saturday that many areas remain isolated, and people are in urgent need of rescue.
Trami, also known as Kristine, exited the northwestern Philippines on Friday, resulting in at least 85 deaths and 41 missing persons, making it one of the deadliest storms of the year in the region, according to the government agency. The death toll is expected to rise as more reports emerge from previously inaccessible areas.
Emergency personnel, including police and firefighters, are using backhoes and sniffer dogs to continue search and rescue efforts in the lakeside town of Talisay in Batangas province. In the town center, more than a dozen coffins bearing the remains of storm victims were lined up. These victims were discovered amidst mud, boulders, and trees from landslides.
President Ferdinand Marcos, who inspected another hard-hit region southeast of Manila Saturday, said the unusually large volume of rainfall dumped by the storm — including in some areas that saw one to two months’ worth of rainfall in just 24 hours — overwhelmed flood controls in provinces lashed by Trami.
"The water was just too much,” Marcos told reporters.
“We’re not done yet with our rescue work,” he said. “Our problem here is, there are still many areas that remain flooded and cannot be accessed even by big trucks."
His administration, Marcos said, would plan to start work on a major flood control project that can meet the unprecedented threats posed by climate change.
More than 5 million people were in the path of the storm, including nearly half a million who mostly fled to more than 6,300 emergency shelters in several provinces, the government agency said.
In an emergency Cabinet meeting, Marcos raised concerns over reports by government forecasters that the storm — the 11th to hit the Philippines this year — could make a U-turn next week as it is pushed back by high-pressure winds in the South China Sea.
The storm was forecast to batter Vietnam over the weekend if it would not veer off course.
To ensure public safety, the Philippine government closed schools and offices on Friday, and suspended inter-island ferry services, stranding thousands. As weather conditions cleared on Saturday, cleanup operations began in many areas.
The Philippines, situated between the Pacific Ocean and the South China Sea, experiences around 20 storms and typhoons annually. In 2013, Typhoon Haiyan left over 7,300 people dead or missing and devastated entire communities.
