At What Point Would Public Debt to GDP Ratio Become Bad For Us

I was watching Last Week Tonight on Youtube and something John Oliver said (at 1:36) struck me. He pointed out that Italy’s public debt is 130% of GDP.

This surprised me because just this morning I heard an expert on morning TV say that it’s projected that Kenya’s public debt could hit 60% of GDP by the end of 2018, at which point it could become unmanageble.

I got questions – anyone knowledgeable in this matter please feel free to explain in primary school English/Kiswahili.

What are the consequences of having such high public debt? At what point, in terms of public debt, do you think Kenya would have crossed the line and be in the red? What are Kenya’s options if we were to avoid debt? What would be a healthy debt size for a country like Kenya? We are not doing too badly, are we?

Here is the Last Week Tonight video.

I fast and pray the debt to reach 200% of GDP tushindwe kulipa so that we open our eyes we audit this constitution which we created many offices. It will be blessing in disguise we call for a referendum we slash this post we created.

This is one of economic stats that journalists use that don’t practically make any sense. GDP refers to what that country produces every year. Debt is accumulated since the country came into existence. So what does GDP to debt tell you about performance? Nothing. But it sounds good.

Katiba ya Baba…

Just google or watch any documentary on the Greek debt crisis… in the end the people who suffer are the wanainchi because of the austerity measures imposed by the ‘debt owners’. The rich guys will move their money overseas na sisi tubaki kula mabaki.

40% for developing countries and 60% for developed countries according to some article i have just read online.

There was a Harvard study that even the U.S. Congress had quoted which placed the tipping point at around 90%. However, the study was later found to have used crooked data and was thus quashed.

Don’t worry bro. We are very small. A first world country will come and rescue us. This money is nothing to them. It’s like having a 10 year old with a debt of 2000 bob. To him that’s a lot of cash. In fact, he cannot figure out how to pay that debt. He gets very very stressed. However, much as 2k is quite some cash, it’s no big deal with you. You go ahead and pay it. But you give conditions. Your son must strictly take all instructions from you from now onwards. In short he can never think for himself anymore. When you say jump he only need to know how high he should jump.
Most likely that first world country will be the People’s Republic of China-man. Read the new edition of the economic hitman. In that case you can be sure we are screwed. But the Great Britain cannot allow Chinaman to take control of her colonies under no circumstances. I bet this is how WWIII will started. Those are my thoughts!

You have scary thoughts, friend.

% to GDP is not the issue. Its how much you pay out of revenue. I hear Japan with its 220% only pays 4% of revenue to debt. Some of their bonds have been set to 100 years
payment while ours is 5 to 30 yrs. one guy paying 50mil Morgage in 100yrs or another paying 10mil in 5 years, who is more stressed?
Also Japan may be paying 3% interest per year, while we pay 8.9%, so bigger repayments in comparison to GDP. So when KRA just turns to be a debt payer instead of development and salaries, teachers, Docs clerks nurses will be retrenched to reduce wage bill as there is no money to pay salaries. Leading to wide spread liquidity issues allover. Basically, CHAOS.

Japan has close to 200%
Singapore over 100%
Both nations have at least an AA rating.
There are many factors that come into play.
For example Japan’s debt is mostly local.Not foreign owned.
Singapore has demonstrated that it can easily pay its debts.
Kenya’s debt is nothing to worry about as a large part of it comes with guarantees for payment

Who is the guarantor?

[SIZE=4]Sri Lanka, Struggling With Debt, Hands a Major Port to China [/SIZE]

The SGR debt for example is guatanteed by the Railway Development levy.A 1% levy imposed on all imports except for those from the EAC and heavy fuel used for power generation.
Last year around 30 billion was collected.