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The poor logic behind interest rate rise..
Rank: Member Joined: 4/2/2011 Posts: 629 Location: Nai
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bwenyenye wrote:
Our real problem is huge demand for imports by way of fuel, fake batteries, sugar, 2nd hand cars, spaghetti.. you name it. We are importing things we want at the expense of what we NEED as nation.
Mine is a very rudimentary but effective way. Stop ( highly penalize) all second hand car imports, Hike the fuel price even further for luxury travel. Or make sure driving is for the very rich. This will reduce fuel import and reduce by half the BOP. We should also ban all unnecesarry imports like rice, sugar ( no one died for lack of sugar in their tea), ... well basically 85% of what Nakumatt stocks. Life will be hard for a while but we will get used to it. Na watu warudi ocha wakalime!
The consequences of your proposed actions will be the following; (1) ban all unnecesarry imports like rice, sugar - Bootlegging and a black market for the same commodities will spring up and lead to even higher prices. (2) Hike fuel prices even further for luxury travel - The pump does not differentiate between luxury and necessary travel - transportation costs for essential goods will rise and lead to higher commodity prices, higher public transport costs and eventually civil unrest The government should shamelessly subsidize irrigation fed agriculture, discontinue the tendering system for petroleum importers in order to encourage competition, ban all briefcase petroleum importers, Increase the working capital requirements for licensed petroleum importers, reign in the interest rates spread enjoyed by banks and ruthlessly crack down on industry cartels in the petroleum and banking sectors.
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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http://www.businessdaily...0/-/qad8vxz/-/index.html“We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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VituVingiSana wrote:Scubidu wrote:VituVingiSana wrote:The 'stronger' KES will not stay there much longer. CBK might as well let it drift towards 100 (not weaker than 100) & adjust interest rates to maintain it at 100.
It is time for Kenyans to buy more local goods. The largest import is fuel but that can be reduced by sourcing local bio-fuels (not easy but it can be done) over the next 5 years.
I saw a guy who made fuel from castor oil seeds, jatropha, etc. We can also use ethanol blended into the fuel we use. We can import those electric cars from Uganda-it's brilliant. But u have gud ideas. We have no value add here; hardly consume any local product. Perhaps we need to put more energy infrastructure on BOOT so that private investors could fund infrastructure with FDI. It shouldn't be hard for ADB to raise funds for clean energy projects here. Geothermal potential is high. One question though... i'm curious, what's the significance of 100? 100/- is a psychological level plus it makes it easy to calculate!  but it also provides a benchmark if we were to dollarize coz just take your one sok to the bank & get a $ It tough for local manufacturers but Kenyans are often stupid & aspirational. Many will buy imported sugary cereals instead of local weetabix. The same with biscuits. I even saw imported water in Nakumatt. How about buying Peptang instead of Heinz? Geothermal will take 3-5 years before we see any significant benefits. And if it is not mismanaged. Peptang vs Heinz. I'll admit i'm guilty, preferring Heinz. Love Weetabix. I see your point though on the dollar thing... very nice. Yes geothermal is slow... damn PPAs as well. “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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VituVingiSana wrote:The only way to shore up the KES is to reduce imports. We import everything including Toilet Paper. When I shop at Nakumatt, I am shocked at what people buy.
Construction: There is a local firm (I think in Kisumu) called Flamingo Tiles. Also Sai Raj Tiles. Let's buy LOCAL tiles not imported tiles just so we can say "Italian" or "South African". They provide jobs to KENYAN clay mines, KPLC, etc.
Food: Stop with the (zero local content) imported cereals. They are often sugary. Go for locally manufactured Weetabix which mixes local & imported wheat & is manufactured in Nairobi. Weetabix provides local jobs including KENYAN farmers, carton manufacturers, etc.
Fuel: This is hard to change but let's encourage local sources. There is a bio-ethanol fuel I saw on telly. I might get that vs LPG. How about making 'charcoal' from other sources like coffee husks or maize stalks or wood dust?
Water: I avoid buying bottled water. A little trick a friend showed me. I will fill 75% of my bottle (or those durable reusable sports bottles) at home then leave it in the freezer. When I go out, I fill the remainder 25% with a bit of squash/quencher. I have a cold drink that remains cold as the ice slowly melts.
Shoes: That's a tough one since Bata does not have a great range. Even it imports many of the shoes it sells. I try though!
Clothes: It drives me nuts that Kenya is an exporter of textiles under AGOA (& even to Europe) yet we import clothes from China, India & South Africa. We need to create a SENSIBLE 'national dress' (not that silly stuff akina awori modeled) that should be 'copyrighted' for manufacture only in Kenya. We need to get back to Bespoke Tailoring for men using good materials & local tailors. These suits/shirts fit well & last longer.
Farming/Food: Let's embrace the TRADITIONAL foods like Njahi, Cassava, etc. Why not eat healthier Sweet Potatoes instead of adding sugar to everything? Let's move away from maize (imported from Central America) to what is better suited for Kenya's climate/land.
Furniture: We are obsessed by the (cheaper) East Asian furniture. Let's go for a more rustic look made by local artisans. My uncle had his cushions/sofas re-done & they look FANTASTIC. They cost 50% of the cost of replacing the sofas. This is perfect . Excellent stuff. You need to get these ideas done on paper somewhere. Or start an entirely new topic on wazua on how we can change our consumption habits. Bravo “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Member Joined: 9/27/2011 Posts: 123 Location: Nairobi
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VituVingiSana wrote:The only way to shore up the KES is to reduce imports. We import everything including Toilet Paper. When I shop at Nakumatt, I am shocked at what people buy.
Construction: There is a local firm (I think in Kisumu) called Flamingo Tiles. Also Sai Raj Tiles. Let's buy LOCAL tiles not imported tiles just so we can say "Italian" or "South African". They provide jobs to KENYAN clay mines, KPLC, etc.
Food: Stop with the (zero local content) imported cereals. They are often sugary. Go for locally manufactured Weetabix which mixes local & imported wheat & is manufactured in Nairobi. Weetabix provides local jobs including KENYAN farmers, carton manufacturers, etc.
Fuel: This is hard to change but let's encourage local sources. There is a bio-ethanol fuel I saw on telly. I might get that vs LPG. How about making 'charcoal' from other sources like coffee husks or maize stalks or wood dust?
Water: I avoid buying bottled water. A little trick a friend showed me. I will fill 75% of my bottle (or those durable reusable sports bottles) at home then leave it in the freezer. When I go out, I fill the remainder 25% with a bit of squash/quencher. I have a cold drink that remains cold as the ice slowly melts.
Shoes: That's a tough one since Bata does not have a great range. Even it imports many of the shoes it sells. I try though!
Clothes: It drives me nuts that Kenya is an exporter of textiles under AGOA (& even to Europe) yet we import clothes from China, India & South Africa. We need to create a SENSIBLE 'national dress' (not that silly stuff akina awori modeled) that should be 'copyrighted' for manufacture only in Kenya. We need to get back to Bespoke Tailoring for men using good materials & local tailors. These suits/shirts fit well & last longer.
Farming/Food: Let's embrace the TRADITIONAL foods like Njahi, Cassava, etc. Why not eat healthier Sweet Potatoes instead of adding sugar to everything? Let's move away from maize (imported from Central America) to what is better suited for Kenya's climate/land.
Furniture: We are obsessed by the (cheaper) East Asian furniture. Let's go for a more rustic look made by local artisans. My uncle had his cushions/sofas re-done & they look FANTASTIC. They cost 50% of the cost of replacing the sofas. @vvs to add to your list is drinks. Let us go for Keroche & KWAL rather than Diageo though I wont say the same soft drinks - Kuguru vs Coca Cola.
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Rank: Member Joined: 9/13/2006 Posts: 123
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its all well and good saying that we should be patriotic and buy kenyan products to shore up the shilling but the reallity is that kenyan industries are struggling and can not produce high quality products due to the high cost of power, labour, fuel, finance costs (thanks to the interest rate rise!) in this country. that is why goods produced in india and china can be shipped all this way, paid full duty on and still be sold cheaper than kenyan products! second thing is quality - compare local biscuits with imported ones from mauritius or south africa, simillar prices but big difference in quality. if i have choice in nakumatt i am definitely going to but the imported one, why should i pay for an inferior product at the same price? i think all businesses in this country are going to have rough run for the next few months and only the strongest will survive. its admirable the resillience businesses have in this country - they pay among the highest tax rates in the world and get zero support from their government apart from corruption and great infrastructure!
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Anybody to draw a graph to show the correlation between the stimulus package, Shilling, Yields on T-Bills and inflation plus insert MPC decision in between?
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Rank: Elder Joined: 1/21/2010 Posts: 6,675 Location: Nairobi
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The GoK must continue to spend.. The short term depreciation in currency was felt by all asian tigers at this stage of their economic growth but the multiplier effect of boosting supply, infrastructure, electricity, road networks and hence employment has evidently been felt.. Kenyans too should not get spooked by this short term sacrifice. Mark 12:29
Deuteronomy 4:16
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Rank: Member Joined: 2/11/2011 Posts: 240 Location: jamuhuri ya kenya
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guru267 wrote:
Kenyans too should not get spooked by this short term sacrifice
So, do you want the shilling to exchange at below 90 vs the usd or above 100 vs the usd? Please give your reason. Personaly i want the shilling to strengthen vs the dollar, my reason being i'm an importer
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Rank: Elder Joined: 1/21/2010 Posts: 6,675 Location: Nairobi
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jimmy1 wrote:guru267 wrote:
Kenyans too should not get spooked by this short term sacrifice
So, do you want the shilling to exchange at below 90 vs the usd or above 100 vs the usd? Please give your reason. Personaly i want the shilling to strengthen vs the dollar, my reason being i'm an importer Its not about what I want but rather what is best for Kenya.. The recent expansionary fiscal policies have driven growth in infrastructure, roads, social welfare, electricity, irrigation and housing. I simply advise that these policies continue despite their weakening effect in the shilling since its only fairly short term. Mark 12:29
Deuteronomy 4:16
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Rank: Member Joined: 2/11/2011 Posts: 240 Location: jamuhuri ya kenya
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guru267 wrote:I simply advise that these policies continue despite their weakening effect in the shilling since its only fairly short term. In one thread you wrote "the shilling must continue to fall whether the CBK likes it or not....whether they raise rates or not". You also wrote "i'm not blaming anyone for causing this but i'm pretty sure my dog would do a better job than the 'doctor' is currently doing at trying to solve this mess.." This are very strong opinions which you are entitled to. This leads me to believe that you have a personal interest in a weaker ksh just like many other people (mainly importers) have an interest in a strong ksh. Could your personal interest be related to currency speculation?
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Rank: Member Joined: 9/13/2006 Posts: 123
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@jimmy1: you are an importer and probably feel that you will benefit from the 92 rate to the USD, but do the maths taking into account the current interest rate on borrowing, or the amount you will pay in the period your goods are shipped and your LC has to be paid, and you will see you are better off with the USD at 100 but interest rates at 16%. Especially if you are an importer who is rolling over containers every week.
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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If the IMF loan comes in by Dec i see interest rates being cut by Q1 2012, inflation might be on its way down by then...yields on T-Bills will be tumbling and then stocks.....one can't tell considering Kenyans love destructive politics.
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Rank: Elder Joined: 1/21/2010 Posts: 6,675 Location: Nairobi
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jimmy1 wrote:guru267 wrote:I simply advise that these policies continue despite their weakening effect in the shilling since its only fairly short term. In one thread you wrote "the shilling must continue to fall whether the CBK likes it or not....whether they raise rates or not". You also wrote "i'm not blaming anyone for causing this but i'm pretty sure my dog would do a better job than the 'doctor' is currently doing at trying to solve this mess.." This are very strong opinions which you are entitled to. This leads me to believe that you have a personal interest in a weaker ksh just like many other people (mainly importers) have an interest in a strong ksh. Could your personal interest be related to currency speculation? @jimmy1 lol... This was a very heated moment for me.. Though I have interest in the kshs falling because literally all my income comes from outside kenya this was not the reason.. The policies being implemented to stop the shilling decline will destroy economic growth in the country, thats what I have a problem with... Mark 12:29
Deuteronomy 4:16
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Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi
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pops wrote:its all well and good saying that we should be patriotic and buy kenyan products to shore up the shilling but the reallity is that kenyan industries are struggling and can not produce high quality products due to the high cost of power, labour, fuel, finance costs (thanks to the interest rate rise!) in this country. that is why goods produced in india and china can be shipped all this way, paid full duty on and still be sold cheaper than kenyan products! second thing is quality - compare local biscuits with imported ones from mauritius or south africa, simillar prices but big difference in quality. if i have choice in nakumatt i am definitely going to but the imported one, why should i pay for an inferior product at the same price? i think all businesses in this country are going to have rough run for the next few months and only the strongest will survive. its admirable the resillience businesses have in this country - they pay among the highest tax rates in the world and get zero support from their government apart from corruption and great infrastructure! sad reality it is if most of what we produce are of inferior quality. but if all we do is import all these high quality goods from abroad, how do we pay for it. are kenyan workers of high quality?  “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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What you don't realize is that even if CBR is cut today to 5%, banks will not lower their lending rates why? cos big/bulky/corporate depositors/investors will demand inflation beating returns, which even the current 3 month T-Bill at 16% is not offering!
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Rank: Member Joined: 11/21/2006 Posts: 608 Location: Ruiru
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the deal wrote:What you don't realize is that even if CBR is cut today to 5%, banks will not lower their lending rates why? cos big/bulky/corporate depositors/investors will demand inflation beating returns, which even the current 3 month T-Bill at 16% is not offering! A very fair observation May be there should be differentiated interest rates depending on the intended use of the cash. Production oriented credit should be availed at concessionary rates. Like we had KTDC for tourism. But if a fella wants cash to import furniture and clothes, the bank should charge him 100% interest rate. "..I am because we are. "― Ubuntu, Umtu,
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