Friday, April 4, 2008


The jokers at treasury are at it.

After issuing unrealistic growth figures for this year's GDP, they are now revising their forecast downwards by two-percentage points.

But what they are pretty good at is hiding behind situations.

With inflation running away, Treasury bureaucrats are busy shifting blame to the post-election chaos.

Never mind that inflation was up and on the rise even before the elections - THAT'S WHY HIGH PRICES WERE A CAMPAIGN ISSUE!

The Central Bank is sleeping period!

Njuguna, the colourless governor of CBK, has been issuing statements oddly at variance with the economic situation on the ground.

He has ignored the fact that liquidity is out of hand in this country.

His own institution reported being unable to shore up the rate of expansion of the money supply in the country.

The money in the system grew by 21 percent against a benchmark of 15 per cent that the CBK had set for itself.

From campaign funds, to foreign dollar inflows to investments and the like, the nation is flush.

It's no wonder banks, usually keen to hedge themselves against credit crunches at times of IPOs are now lending with abandon to would-be buyers of Safaricom.

Of course the CBK has been silent on this malaise just as it stood silently as gullible masses took their money to pyramid schemes last year.

It would help if once in a while the bank gave cogent and intellectually feasible guidance on our economy.

But one does not know what the so-called reserve bank holds as its philosophy.

Never mind that economic models that were thought to be sound in the West are craning over and the FED, the Bank of England, the ECB and the BoJ are all scratching their heads and offering differing solutions to the same problems.

At least there they acknowledge there is a problem. And by all indications, they are trying to get to the bottom of it.

At "BENKI KUU", no one is admitting there is a problem let alone giving signals of what they want to do.

It is immaterial that the so-called CBK market operations are notoriously unreliable as an intervention measure.

To begin with, the CBR unlike the religiously-watched US Fed rate has little if any impact on market players operations.

Secondly, it would seem odd for the CBK to begin mop-up operations when the country is desperate to maintain growth and high cost of credit certainly doesn't spur growth.

Third, Safaricom IPO might do that for the CBK by sucking up the liquidity in the market.

Fourth, government and humanitarian agencies spending on relief is likely to keep bloating liquidity.

Finally, unless CBK begins to admit that liquidity is as much a factor in this current inflation as the post-election chaos, it will keep providing explanations far into the future even as inflation approaches 25%.

PS: post-election disruption of production should only have affected ready produce in so far as the current consumer products are concerned and even then, those hiccups should have been overcome by now.


If the secondary effect, that is the disruption of the planting season thru - displacement, high fertiliser and diesel prices - has not yet been felt since the harvest season is still some months away, what will happen when that time comes?

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