We Are In The Last Step

Those who complain that we are warning about reckless borrowing and yet the government hasn’t defaulted are living in a bubble that will burst soon. The government has already defaulted on over KSh 700 billion owed to suppliers. FKE puts the figure at over KSh 1 trillion.

https://x.com/StandardKenya/status/1883047205235306722

A default doesn’t happen overnight. The hierarchy of default starts with suppliers, then employees and finally lenders. This is in the order of weakness of these entities in terms of dealing with a default.

One time security minister John Michuki said that the government can knock out all your teeth and tell you to go and report. That is why the government adopts a “can’t pay won’t pay” approach to pending bills and fears nothing. The suppliers are few and aren’t organised enough to pursue the government and cause any adverse political consequences.

When it comes to employees, some government workers have been going for months without pay. These include county government workers and university lecturers. This second-level default happening under the radar is indicative of trouble ahead. Failure to pay workers such as teachers or security sector workers can have serious consequences. The government will even borrow to pay them. But for how long can you borrow to pay salaries?

https://x.com/citizentvkenya/status/1883551738910662710

When it comes to lenders things become even trickier. Over half of our public debt is owed to Kenyans who have deposited money in banks and purchased various financial products. A default would hit everything including your MPesa balances. So we are told that the government is borrowing even to pay interest to avoid default. How sustainable is that?

That is why you need to look at this issue in a hierarchical and systematic manner. Saying people should only raise the alarm over the debt situation when a default has occurred makes no sense. What will be the point of making noise when we have reached a point of no return