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The IMF is under strain amid rising world debt.



The world’s lender of last resort is hampered by geopolitical tensions.

In the once-bustling streets around the IMF’s headquarters in Washington, dc, you can hardly spot a soul these days. Soul-searching is also keeping officials busy inside the building.

With government debt ballooning everywhere, many continue to criss-cross the globe, talking with countries that can still borrow and coaxing creditors into granting relief to those who cannot.

But the world’s lender of last resort is hampered by the conflict between its members—just as rising interest rates threaten to cause a big bang of defaults.

Two years of pandemic fighting

Two years of pandemic-fighting and on-off lockdowns have turbocharged global debt, both public and private.

2020 alone it soared by 28 percentage points, to 256% of GDP—the largest one-year rise in borrowing since the second world war.

Over recent months, as central banks have raised interest rates to combat inflation, the cost of servicing it has increased, rising demand for the fund’s assistance.

For most large emerging markets the pain is manageable, for now. Soaring inflation and sinking currencies have not yet pushed the likes of Brazil or India towards crisis.

Instead, a quieter crisis is breaking out in smaller countries devoid of hard currency. Sri Lanka, Tunisia, Lebanon, and Ghana are all candidates for loan programs from the IMF.

On February 23rd the fund said it would start talks with Ukraine over a possible $700m debt tranche.

World’s poorest countries

More than half of the 60 poorest countries carry debt loads that need restructuring.

That may be an underestimate: a recent World Bank report found that 40% of low-income countries have not published any data about their sovereign debt since 2020.


The IMF has enough firepower to help solvent countries. Its resources were increased after the global financial crisis, boosting its lending capacity to $1trn today, up from $400bn in 2010.

It has also responded creatively to members’ difficulties since the start of the pandemic. When markets melted down in early 2020.

It launched a short-term liquidity facility through which countries facing cash squeezes could borrow cheaply.

Also lent $170bn through rapid credit facilities similar to its standard loan programs, but with fewer strings attached.

Last August it also doled out $650bn-worth of new special drawing rights (SDRs), a quasi-currency used to augment countries’ foreign-exchange reserves, to all its members.

Because SDRs are allocated based on what each member contributes to the fund, most of the issuance went to well-off countries.

$21bn was allotted to those that needed it. But the fund is working to create a trust through which some of the SDRs allocated to richer members might be available for long-term lending to poorer ones.

The g20 promised last year to pony up $100bn for the trust but only $60bn has been pledged.

Debt crisis

Such programs have helped to tide over many solvent countries when markets have dried up. But lending, no matter how easy or cheap, is of little help to countries that are nearly bankrupt.

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At least a dozen countries today owe more than they can hope to repay. Given the fragile outlook for growth—clouded by tighter monetary policy.

A weak Chinese economy, and geopolitical tensions—more may join their ranks.

Without debt relief, many will only use IMF loans to repay other creditors, leaving the fund with an ever-growing share of the tab.

Debt Service Suspension Initiative

The IMF used its convening power to cajole richer members to forgo some of the money owed to them.

In 2020 its efforts yielded the Debt Service Suspension Initiative, through which 73 low-income countries became eligible for a temporary moratorium on debt payments.

By the end of the program in December last year nearly 50 countries had opted to make use of it, freeing some $10bn they could use to meet urgent needs.

Separately, the IMF also suspended some debt payments on loans it had made itself to 29 very poor countries.

G20 Initiative

But such suspensions do not make underlying debt loads more sustainable, because the delayed principal and interest payments remain due.

In November 2020, the “common framework” for the new g20 initiative was structured.

Its utter failure to gain traction—so far only three countries have sought relief under its auspices, and none has completed the process.

It illustrates the new political pickle the IMF finds itself in.

Individual countries need debt relief and whose framework exists the intention to provide a broad set of principles.

“Paris Club”—rich-world governments have long co-operated in cases of sovereign insolvency.

This is to include private creditors and countries like China, India, and Saudi Arabia.

Consequences of G20 Initiative

These, however, have largely refused to play ball. That is a big problem.

Whereas a decade ago Paris Club members still provided the bulk of the credit to poor-country governments, China is increasingly bankrolling them.

Its disclosed lending (which probably understates the true total) amounts to roughly half the money they owe to other governments.

Restructuring such debt is extremely hard. Views differ within China as to whether and how much debt relief to provide to overextended borrowers.

Many different Chinese institutions are lending foreign countries though not all of which are keen to help.

And many poor countries are reluctant to seek relief from China, lest they cut themselves off from future access to Chinese financing or otherwise antagonize the Chinese government.

Yet without participation from other lenders, the IMF is in a bind: under pressure from rich-world politicians to do more to help struggling economies.

Which are always unable to provide programs that put countries on a path towards stable finances.


Some critics suspect that the fund, squeezed in this way, has occasionally indulged in excessive optimism about countries’ prospects in order to justify its lending.

In January Kenneth Rogoff, a former chief economist of the IMF wrote that the fund’s permissiveness risked transforming the institution into an aid agency.

A recent, tentative agreement between the IMF and Argentina, to refinance $45bn owed to the fund, drew widespread criticism.

This was due to the vagueness of the path it sketched for the eventual repayment of the loan.

The case of Argentina

The fund lacks good alternatives. Failure to reach a deal with Argentina might well have meant financial disaster for that country.

Its leaders could perhaps be more vocal in calling for China to be more lenient.

But the West’s reluctance to increase the country’s 6% voting share at the IMF, to a figure matching its new economic might, has made China less willing to listen.

And the window for getting China deeper into the tent has probably closed. Its relations with the West have deteriorated so much.

In the 1990s the IMF and the World Bank marshaled the Heavily Indebted Poor Countries Initiative.

Lumps of debt owed by 37 economies were forgiven—with most of the funding coming from creditor countries.

The sums needed today are not huge, but getting the world’s big countries to agree on anything seems even harder.

On February 18th a g20 meeting ended with no firm commitment to expand debt relief.

That bodes ill for the IMF. Without global co-operation, it is fast becoming a shadow of its former self. 

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Three Global Firms Signed By Nairobi Financial Hub On Its Launch




Three companies were signed by Nairobi’s international financial centre on the day of its launch. The three include Prudential plc, ARC Ride Kenya and AirCarbon Exchange (ACX).

The Nairobi International Financial Centre (NIFC) is a special economic zone for financial firms.

Prudential, one of the world’s biggest insurers and asset managers, became the first firm to formally join the NIFC.

Singapore-based global carbon exchange ACX came along with Prudential. It seeks to set up a carbon exchange in Kenya.

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NIFC has also admitted ARC Ride Kenya. It is a new start-up that is going to establish an electric vehicle assembly plant in Nairobi. The plant will produce two and three-wheeled electric bikes and scooters.

Also, the Financial Centre is determined to bolster the manufacturing sector in the country. It has signed an MoU with the Kenya Association of Manufacturers (KAM), to help increase financing and investment in the sector.

NIFC authority has hinted at being in discussion with other participants seeking to join it and will give official news soon.

“Last year Prudential Plc, one of the world’s biggest insurers and asset managers, made a commitment to relocating their Africa headquarters from London to Nairobi and join the Centre. Today we are proud to announce that Prudential becomes the first firm to formally join the Nairobi International Financial Centre,” Vincent Rague, Chairman NIFC Authority.

After many years of waiting, the hub will eye large foreign firms, boosting capital flows to Kenya and the region.

The authority has singled-out four sectors that it will prioritise for growth: financial technology, green finance, investment funds, and becoming a hub for regional multinationals.

The NIFC general regulations have been enacted, as the initial set of tax incentive proposals have been passed.

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Certification from the NIFC Authority must be applied by Firms considering conducting business through the NIFC.

A 15% corporate tax will benefit firms operating a carbon market exchange or emission trading system under the NIFC. The 15% advantage will happen for the first 10 years of operation.

Companies certified by the NIFC Authority and have invested a minimum of Sh5 billion will benefit from the certainty that, the Capital Gains Tax applicable at the time they make their investments will remain unchanged during the lifetime of the investments.

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Hackers Make Tactical Change, Now Targeting Small Businesses




Traditionally, cybercriminals have been targeting big companies with aim of demanding ransoms running into millions. Nonetheless, the trend no longer holds, as new studies have shown the shift in hackers’ interest from big companies to small and medium ones.

Studies have shown that hackers are shifting their focus to small online businesses which they believe are more vulnerable.

Experts have warned that these SMEs and payment portals, especially those relying on mobile payment solutions, are now facing high risks of cyber attacks coordinated by these hackers.

Speaking during the inaugural Africa Cybersecurity Congress held in Nairobi, Hadi Maeleb, Agora Group co-founder and CEO said the threats to online businesses were growing at a high rate.

Further, he stated that more than 90% of business owners are unaware that their enterprises are at risk, despite the high growth rate of the attacks.

“Cybercriminals are now targeting small businesses more as they have realized that these enterprises do believe they would be exposed due to their comparatively low turnovers until they lose their data and payments are compromised,” said Mr Maeleb.

With the adoption of e-commerce platforms, State agencies, financial institutions, healthcare, energy and utilities have persistently faced cyber-attacks in the recent past.

According to CAK- Communications Authority of Kenya’s first-quarter data (between January to March 2022), a total of 79.2 million cyber-attacks were reported. This has prompted the government to issue 28,848 advisories in an attempt to fight the rising attacks.

Invest in Cybersecurity

Mr Maeleb noted that business owners should invest in cybersecurity tools as there is no magical solution to cybercrime.

“This ‘democratization’ of cyberattacks is expected to push losses due to business interruption, financial theft, personal data breaches and even ransom payments over the Sh4 trillion mark by end of 2022,” he said.

At the peak of the pandemic, several states adopted tough lockdown measures such as social distancing, working from home, and online learning.

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Hackers shifting focus to small businesses.

This adoption of digital solutions such as e-commerce, remote working and banking went up as Kenyans turned to online platforms to curb the spread of the coronavirus.

“Unfortunately for them, the business of cybercrime has evolved to a point where attacks like ransomware are now sold as a service,” he added.

Even though these measures triggered the adoption of digital platforms, they also increased vulnerability such as ransom, data breaches, harassment, cyberbullying, and data breaches.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

To achieve Kenya’s Vision 2030 goal of a regional ICT hub, the tech sector was expected to contribute directly and indirectly to an additional 1.5% of Kenya’s GDP by 2017/2018.

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Why Buyers Are Now Running Away From Popular Used Toyota Cars




As it has been noted that Kenyans are now running away from the popular used Toyota car models, contrary to what has been a tradition in the country. The rise in their costs has seen even dealers cut down on imports of these vehicles due to decreased demand.

Traditionally, popular models such as Toyota Premio and RAV4 have been synonymous with middle-income earners over the years. However, this is no longer the trend.

Car dealers say more Kenyans are now going for vehicles such as Nissan Sylphy and Mazda, which cost less compared with popular Toyota models.

Toyota Vs Nisaan and Mazda models

According to Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, Nissan Sylphy and Mazda’s CX5 and Axela, are quickly gaining popularity among Kenyans.

Mr Munyori said the price of a Toyota RAV4 has short up to Sh3 million currently from Sh2.8 million in February while a Premio is going for Sh2.2 million from Sh2 million four months ago.

On the contrary, Mazda Axela is now selling for Sh1.6 million with Nissan Sylphy (Blue Bird) going for at least Sh1.5 million.

Currently, consumers find these brands to be the best alternatives to their preferred models, as they are relatively cheaper and good.

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With the rising household costs, these car prices are making them affordable to most Kenyans as they struggle to balance the high cost of living.

“We are seeing a shift where Kenyans are now moving from the popular brands such as Toyota Premio and RAV4 to other models. This shift has been occasioned by the high cost that these cars are now fetching at the market,” said Mr Munyori.

“In fact, most of the car dealers are hardly bringing in Premio and RAV4 models because they are not moving and they will tie up money that they would need for importation of more vehicles,” he said.

Ex-Japanese vehicles

Ex-Japan vehicles dominate the Kenyan second-hand sector with a more than 80% market share.

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The buyers in the sector prefer these cars as their spare parts are easier to obtain locally compared to other brands. Additionally, buyers believe that the resale value of Toyota vehicles are higher than that of other brands like mazda or Nissan.

Reasons for risisng vehicle cost

The rising cost of vehicles in the country has been linked to the unavailability of dollars locally, a shortage of electronic chips in Japan, and a weakening shilling against the dollar.

The country is currently experiencing extreme dollar shortage, that one has to wait for at least three days to get $20,000 or $25,000 from the banks.

“We have to wait for like nine days in order to accumulate $80,000, and this has seen car dealers delay in making their orders. We are really feeling the impact of the dollar shortage in the market,” Mr Munyori said.

banks have imposed regulations on dollar purchase. This has forced traders to face difficulty in meeting their obligations.

Industrialists are forced to start seeking dollars in advance. The shortage puts a strain on supplier relations and the ability to negotiate favourable prices in gap markets.

On the other hand, Semiconductors are used in making electronic devices. Their shortage has forced the vehicle manufacturers to scale down the production. The quantity and quality cannot be maintained with decrease in one of the crucial raw material.

Finally, the shilling has persistently remained weak against the dollar. this has made it costly for importers shipping in goods.

The shilling has hit a record low trading at of Sh 117.06 against the dollar. This predicts a continued rise in imported goods, and signifies a further dollar shortage crisis.

The continuous depreciation in shilling stability is attributed to increased demand for dollars from importers. This highly arises on importaion of crude oil and merchandised goods.

It should be noted that most external debt is repaid in the dollar. Therefore, a weakened shilling increases prices of imported goods, and puts pressure on the country’s debt repayment.

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