Thursday, September 22, 2011

Is Kenya's famine a man made problem?

I just read this article from a man a highly respect and who's opinion and take on African matters is thought provoking.

Mr. Fengler is the World Bank's Lead Economist for Kenya. His take is that the famine in Kenya is man made, and requires a man made soluiton. His arguments are rich, do drop by his blog

Of Inflation, monetary policies and the IMF

An online discussion with business journalists on twitter this morning regarding the IMF’s role in the Kenyan economy resulted into a heated discourse with the Star’s James Mbugua saying “Why is the IMF more concerned with Inflation than growth? They’ve messed us up”. He went on to say “Everything that Central bank has been doing has IMF written all over it.”

For those not in Kenya- the shilling has weakened to a 17 year low against the almighty dollar- due to a combined number of reasons, mostly blamed on erratic international crude prices and a strengthening dollar, and the issue of speculation has not also be ruled out.

Now a weak shilling has a ripple effect- there are those that benefit, especially exporters, in our case, horticulture, coffee and the tourism industry, fall under the winners. But the losers are more. Being an oil import dependent economy- the price per liter of fuel has been on the increase in recent months. This has had a domino effect on manufacturers who rely on fuel for transportation and energy when electricity fails. And talking of electricity- the fuel costs generally push up the bills that arrive in your post office box every month.

Now with that in mind; there are monetary policies which basically have 3 instruments that Central bank can use to bring about price stability in the economy. When there’s a high dollar demand, the shilling weakens; The CBK can buy securities in exchange for money stock ( To increase liquidity in the market)-or vise versa, hence creating an equilibrium. There are other more complex instruments, such as the interbank over-night lending rates. It’s a short term financing tool with punitive interest rates, leaving the central bank as a lender of last resort. This article by the Business daily explains this as well as updates us on the latest on this.
So how does the IMF come in?

Because it is in times like these that the expertise and much needed dollar injection can offer some stability to the shilling while the economic expertise can advice Kenya on successful ways of handling the crisis. Many feel that the IMF hasn’t acted in the interests of ordinary Kenyans as an ailing population.

The Fund- as it is known in other quarters has been blamed for concentrating more on the issue of inflation, which some say is just a symptom, other than the actual problem. At a press briefing with Antoinette Sayeh the IMF Chief for Africa, at the IMF Annual meetings in Washington, I asked her about the IMF’s focus areas in relation to inflation and growth-and her concern was that Inflation is not a problem in isolation and must be addressed as a matter of urgency. She says that the Central bank must be wary of fiscal and monetary policies that are overly loose (meaning the government has a larger role in promoting economic well being) and should focus on tight monitory conditions. Economists who support a tight fiscal policy say that a government acts best when it acts least; ideally this promotes low taxes and spending and ideally limit government involvement to the setting of prevailing interest rates.

So are we too deep in? Is CBK already being overly loose? Can the free fall of the shilling be left to the mercies of the markets? Will IMF’s injection of dollars through an Extended Credit facility stem the capital outflow and introduce stability to a shilling that has hit a 17 year low?

Tuesday, September 20, 2011

The free falling shilling

The first time President mwai Kibaki talked about the free fall of the shilling was at the opening bell of the NSE when Brish American commenced trading on the NSE about two weeks ago.

The IPo was undersubscribed, and one reason for that, stock-brokers say is a shilling that won't hold stready as well as Inflation which has robbed Kenyans of disposable income, and the stock exchange is the last of their priorities.

The president talked about a dollar demand that was insatiable, and called on the IMF to quicken the process of the Extended credit facility that Kenya had signed up for earlier this year.

let me break that down: The Extended Credit Facility (ECF) is an IMF facility which provides financial assistance to low income countries with protraced balance of payments. This means that the import- export balance is off tangent, and it usually results in a weak local currency among other economic challenges.

So when Kibaki asked for the a hastening of the ECF, he was basically asking for an injection of dollars into Kenya. Sometimes it can also catalyse additional foreign aid.

So where did all the dollars go?

The problem with the ECF route is the signal it sends. Kibaki's is a distress call. When there's such high demand for dollars , it means there's not enough coming in, usually through proper routes such as investment. But by saying this, Kibaki is admitting, albeit indirectly, that no one's bringing in investment.

That, and that perhaps a Central Bank that has been sleeping on the job. The same monetary policies that have been praised for stabilizing the local unit in the past, is the very same one that is now on the spotlight for letting it weaken. Is it rigidity to work with the times, or a loose abandon in the sense that markets will create a path for the shilling to settle.

Some say that by Christmas the shilling may be at 100 shillings.

Is there a ceiling to this free fall?

IMF cuts Africa's growth projections

The slow down in the US and Europe may be responsible for a slower economic growth for Sub- saharan Africa.

Some African countries are already reeling from the effects of these, that are visible through weaker currencies and reduced investor participation.

In 2008, as the economic crisis sunk several economies, Kenya was one of the economies that remained resilient, hinging its survival on thin intergration levels with the developed world.

But that was then, the second phase of may not leave Africa unscathed. the IMF has cut down its growth projection of Africa to 5.2% from 5.5% projected in April.

so what are the implications of this?

With its track record and strong critics about the IMF's role in Africa's development,Some may dismiss this - but unfortunately investors and the world's super powers who dictate the global economy listen to these financial institutions. If the growth rate is cut, investors read this as a signal to reduced returns.

It is true, that the world is a global village, just ask an apple farmer who now sells one apple at 30 shillings, up from 20 shillings last week.His profit is not 10 shillings per fruit. Ask him why.

It's a jobless world!


Unemployment and how to counter a problem that's been described as an economic time bomb is a key area of discussion at the IMF and World Bank Spring meetings in Washinton DC.

Let me put this into perspective first.

We've seen Obama's recent shaky moments as he battles with empowering Americans after an economic crisis that stripped the worlds number one state to its bare minimum. And now US unemployment figures remains at about 9%. That is a crisis.

In Kenya, that figure (unemployment) is at 36%. Inflation is at 16.67%, and today, the shilling is at an 17 year low of 96 shillings to the greenback. That is a proper definition of the word disaster.

But we walk and talk as if its business as usual as politics and blinders (in the name of price controls and price caps) balm mass appeal.
We need to wake up to the realities of what this means for our economy.

Where are all the jobs? what is really happening?

Reduced capital flows. The developed world is in trouble. Idealy, they're usually quite intersted in investing in African economies, but when thigns are thick back home, you consolidate your investments to what you can clearly see. Things have changed, and Sub-Saharan Africa has been caught in the middle of an economic fireball. No one's got extra disposable income to throw at risky markets. So there's no dollars in the economy and the little that's available is being chased to the 96 shillings level.

Inflation: Sometimes, we don't really comprehend the extent to which these figures trickle down to a regular citizen. Look at it this way. If you have 100 shillings today, 16 shillings out of it is sucked in by Inflation. It does not exist in real terms, what you actually have in your pocket is about 84 shillings.

So imagine how this impacts your employer? Soon, we will see some companies lay off some employees to cover for loses caused by Inflation. In essence, economists agree that Inflation is the number one cause to unemployment.

There's more challenges; like international forces such as high fuel prices. But there's also a large priority issue, as well as a civil society is simply not playing it's role. It is in times like these that the Civil society must tell us what price control will actually do to this economy. In a situation like ours where there's no opposition, we need a strong civil service, and clearly this doesn't exist.

So what will these discussions at the Spring meetings entail?

How will governments be challenged to create jobs?

Are there policies in place that will help encourage growth and create jobs?

The International trade Union says that the IMF gave completely wrong advice to countries to start on fiscal cuts ( meaning budget cuts: that is, more thrifty spending by governments). ITU believes that these cuts saved the jobs of the millionaires- but the big call now is to create jobs for teachers, nurses and construction workers who are the the beating heart of the real economy.

In Kenya, there were no budget cuts, if anything it was an inflated budget. But even more government spending did not create any new jobs. But no one seems to want to address these issues, or is it that no one wants to ask the right questions?

Monday, September 19, 2011


I'm at the IMF annual meetings in Washington DC, where the Global economy -where world economic outlook, poverty eradication and economic development are among the key issues on the agenda.

I was here last spring and I wish someone shared this with me before I came here in April.

So, here's IMF for dummies ( 1st Edition)

The IMF, also known as the “Fund,” was conceived at a United Nations conference convened in Bretton Woods, New Hampshire, United States, in July 1944. The 44 governments represented at that conference sought to build a framework for economic cooperation that would avoid a repetition of the vicious circle of competitive devaluations that had contributed to the Great Depression of the 1930s.

Original aims: Article I of the Articles of Agreement sets out the IMF’s main goals:

■promoting international monetary cooperation;
■facilitating the expansion and balanced growth of international trade;
■promoting exchange stability;
■assisting in the establishment of a multilateral system of payments; and
■making resources available (with adequate safeguards) to members experiencing balance of payments difficulties

Here's a further breakdown

Surveillance: To maintain stability and prevent crises in the international monetary system, the IMF reviews country policies, as well as national, regional, and global economic and financial developments through a formal system known as surveillance. Under the surveillance framework, the IMF provides advice to its 187 member countries, encouraging policies that foster economic stability, reduce vulnerability to economic and financial crises, and raise living standards.

Financial assistance: IMF financing provides member countries the breathing room they need to correct balance of payments problems. A policy program supported by IMF financing is designed by the national authorities in close cooperation with the IMF, and continued financial support is conditioned on effective implementation of this program.

SDRs: The IMF issues an international reserve asset known as Special Drawing Rights (SDRs) that can supplement the official reserves of member countries. Members can also voluntarily exchange SDRs for currencies among themselves

Technical assistance: The IMF provides technical assistance and training to help member countries strengthen their capacity to design and implement effective policies. Technical assistance is offered in several areas, including tax policy and administration, expenditure management, monetary and exchange rate policies, banking and financial system supervision and regulation, legislative frameworks, and statistics

Resources: The IMF’s resources are provided by its member countries, primarily through payment of quotas, which broadly reflect each country’s economic size.

Governance and organization: The IMF is accountable to the governments of its member countries. At the top of its organizational structure is the Board of Governors, which consists of one Governor and one Alternate Governor from each member country.

Source: IMF

IMF ANNUAL MEETINGS - Is the IMF good for Africa

WASHINGTON DC , 18th September 2011

The IMF annual meetings kick off this week.

It's bound to be an exciting time to see how the IMF is responding to global matters, but most importantly for me, how the IMF is responding to the cyclical challenges of poverty, unemployment, rising commodity prices and a weakening currency for many Africans states.

In Kenya, there are different schools of thought regarding the IMF's precense and actions in the country.

On one side we have the sceptics:

After Kenya’s ‘Golden years’ that’s the first ten years after Kenya’s independence, when the growth was impressive, education enrollement doubled, came the 'lost decade' then a number of Kenyans developed hardlines over what they refer to as the worst social experiments. This happened when the IMF and the world bank proposed the structural Adjustment programmes (SAP'S), which gave priority TO spending areas that critics say locked out key social developement sectors such as education and health.

As a result, literacy fell as the government reduced government spending in schools and other social programmes. A paper written about the SAP's says- These structural adjustment programmes have had numerous effects on the economy, such as inflationary pressures, the marginalization of the poor in the distribution of educational and health benefits and a reduction in employment (Ikiara 1990, Mwega and Ndulu 1994, World Bank-UNOP1993,Swamy 1994

The SAP programme was abolished after strong views that the results of the structural adjustment programme was not a success and that it could have been a major cause for poverty on the African continent. In 1999, the IMF replaced it with PRGP- Poverty reduction growth facilty paper, as the new pre-condition for loan and debt relief.

So have this worked for Africa- what are they anyway?

These are some of the key aspects I intend to focus on as the conference kicks off.

what are your thoughts though? Is the IMF good for Africa?

Tuesday, September 13, 2011

I got a postcard from Reddy Kilowatt

Dear Reddy,

When I got home for lunch today, I found this postcard in my bedroom- addressed to me, your employer. Plain, white and black, but it was really good to hear from you. Especially in the form of a post card!

The last time I received a postcard was from Norway,no, he traveled to Paris and sent me another one from there. Beautiful cards that spoke volumes of the cities he who shall remain nameless traveled to.

Postcards always get me nostlagic, but guess what, many times, Postcards usually carry good news- and when you're arrived, for some reason, I wasn't sure it was going to be good news. There's been no good news from you in such a long time- so the excitement and show off session that usually follows the receipt of a regular postcard (usually complete with a stamp from a foreign country) was really not there.

But Reddy, that's not why I'm writing to you.

Despite the fact that you told me you'd be busy on some power lines that affect me supply on Thursday, I'm actually a bit touched by your concern, more so, your new way of showing this concern. It works for me. I like postcards, I like the fact that the notice came to my doorstep, and you did not assume I read the dailies on the days that you post notices of power disruption.

Today I choose not to wonder how the printing of all these postcards will cost you, or how long you can maintain this new way of building our relationship, but I choose to say that you have managed to catch my attention, in a way that no representative of a public company has in a long time.

You called me your employer today- i also hope that since we know that our relationship now henceforth can be based on the respect that defines this relationship we have.

Thanks Reddy, I would like to receive another postcard from you sometime, but hopefully one that will not be about a disruption, but one about electricity rates coming down.

Once again, I loved the postcard!

Regards, Boss Lady.

Monday, September 5, 2011

Country homes and a tooth fairy

Why do you work?

Whenever I ask myself that question; I find myself skirting around.

First, I work because I am expected to have a job. I am expected to have a job so that I become independent, have an income and provide a comfortable life first for my daughter, myself and my family.

Several times, it’s a struggle. We work to pay the bills, and that becomes what life is all about. But is life really all about this?

Every once in a while, those that can afford go on holiday either in the country or abroad travel, that’s when they take their time to enjoy the hard earned money. But many times, event those that can afford it are too deeply engrossed in trying to make more money that they never really enjoy it.

So what is life really about?

This weekend I traveled with a group of friends who believe that life is what happens when self actualization happens. That happens when you stop living only to pay the bills, and begin to live to enjoy even the little money that you can spare in order to smell the flowers.

Is it about financial discipline?

Yes, but it is also about lifestyle decisions that you know will positively impact your happiness.

It doesn’t have to be a trip to Paris, or a weekend in Diani. It could be an afternoon at the arboretum, a picnic with your children at the Ngong Hills, Breakfast at Java, or a country home in a place that warms your heart. Just find one thing that takes your heart and mind away from work, and enjoy the little mercies of life.

So perhaps life is what happens when you’re happy.

And in other news:

Imani has officially joined the Mapengo club. Her tooth is safely under the pillow as we wait for the tooth fairy to come tonight and exchange it for a coin.

Have a great week!

Thursday, September 1, 2011

The voice of the wind

voice of the wind

It isn't as if the wind cannot speak
Sometimes in a whisper
Barely grazing the bouganvelia purple on the porch
sometimes in a breeze
Still the creepers on the front door of our holiday cottage sway to its voice
Creepers still can speak, but only to the foliage underneath
And this evening, while I sit by the poolside
In this warm African sunset
The wind howls
As the sea comes back home
stories, trapped in the crushing waves
Swish, swash, on the wearing down corals beneath our love nest
white sand on this watamu shores
The soft leaves of the bottle brush graze the back of my neck
caressing my barely there tan
The birds, they chirp the evening away
they too,
have stories to tell
Memories, some sweet, some hot & raunchy, some...they will never tell
And most, I will never know....
my heart longs to hear the tales
of the wind
from far away lands
of the sea, swishing, swaying
going and coming back home
of the creepers on the front door
and the bouganvelia on the porch
of the artsy driftwood so delicately placed above the bed
of the sea shells hanging by the bathroom door
of the canvas painting on the of white Arabic walls
I long to hear the stories they can tell
But until then
I shall savour the beauty,
and this stirring within
That comes with the wind, the sea, the birds, the creepers, the bouganvelia
I shall hide under my thoughts