Wednesday, August 20, 2014

RWANDA:Have you noticed that Rwanda's "success story" has suddenly switched from "foreign aid" to "borrowing"?

A $400 million eurobond issued last summer, a $22 million local currency bond this month, and a record breaking $1 billion bond planned for next year!
Paul Kagame has invested most of
his wealth in Israel and UK.He does'nt
care whether the country goes bankrupcy
Sometimes I wonder if Kagame or his servants have read "A Game As Old As Empire". [oh and you too should read it by the way]. The book may helps understand how Kagame got addicted to an extravagant lifestyle that he had never heard of when he was young, stupid, and in the bushes. Kagame has received a lot of free money in form of foreign aid that he hijacked into buying more guns to kill and intimidate his compatriots for over 20 years. Kagame also made a lot of money from looting minerals from DRC and that he wasted on private jets, corrupting lobbyists, spending hotel rooms as expensive as $20 thousand a night, and many other stuff he did not really need. With a fat ego he has nurtured over the years, Kagame does not realize that good things don't always last. And he's busy setting the tone from above telling Rwandans that they are doing just fine, saying it in a way that is really disturbing for anyone thinking long-term.
Rwanda does not have natural resources, and cannot advantageously compete in service market since its educational system sucks. Why? Partly because Kagame dares to tell the younger generations awkward things such as the "educated" is the "stupid". Additionally, the average Rwandan citizen is poor, and the regime has suspended financial aid for students.
And it is not just education programs that are struggling financially. Kagame has starved the Rwanda's public system by embezzling public funds into Crystal Venture, a mafia-like business vehicle Kagame uses to maliciously "privatize" any lucrative SOE (State Owned Enterprise). Last time was EWSA, a utilities company, and next is likely to be the Social Security fund. The latter has become the Finance ministry's cash cow or emergency fund whenever it runs out of cash to pay the big salaries of public servants. Notice that foreign aid made up about 50% of the nations's budget which pays these salaries. Now Kagame thinks he can keep paying these big wages by swiping the credit card. It does not work like that in the real world. At least not in the long run.
Soon later Kagame will have to learn the hard way. Sadly enough, he will have to slash the big wages. He will have to put his elite class through austerity measures, and that will be the end of Kagame as we know him. Remember, Kagame runs on "economic miracle" without which he's a criminal and a genocidaire in the eyes of Rwanda and in the eyes of DRC.
Kagame has started the process to cut salaries, but he's not sure how to proceed. Recently Kagame authorized civil servants to sign employment contracts elsewhere which was a no go zone in past when foreign aid afforded him to pay big salaries. He's hoping the private sector can slowly absorb these public servants. What private sector? In Rwanda there's no private sector outside Kagame's Crystal Venture.
Why will Kagame be finished if he slashes salaries and continues refusing to open the coffers of Crustal Venture? Because most top earners are in military officers whom Kagame has failed to demobilize. Kagame does not what to do with them. Rwanda is a tiny country in the region, but has a bigger more men in uniform and more military generals than any country in its region. Kagame has more more generals than Rwanda needs. Kagame has so many generals that he can no longer control the his army. RDF military chain of command is so fractured that the soldiers have no idea whose orders to obey. The sad part is that Kagame has to keep promoting the military officers in ranks because otherwise he would have to retire them, which he does not have the balls to do.
Now foreign aid is running dry due to Kagame's human rights abuses and Rwanda is maxing on its credit card. Things have gotten so bad that Rwanda is borrowing in local currency to pay debt. For instance, the RWF15.5 billion ($22 million) bond being issued this August is intended to cover a RWF18.5 billion balloon payment that is due on a RWF43.5 billion 5-year bond issued locally in 2008 with a 2014 maturity. Kagame is lying that the August issue is intended to pay for infrastructure project. However, notice that he refrains from specifying which infrastructure to avoid answering tough questions in the future. Borrowing on local markets offers added conveniency because BNR, Rwanda's mother bank, can print money to repay the bond. On the flip side? Excessive printing dilutes the currency value and exacerbates the already rampant inflation in Rwanda. And by the way, notice one of the factors bankrupting Rwanda's import export sector is "negative foreign exchange effects". By borrowing to pay debt, Kagame is taking on a huge gambling risk. The alternative would be to default on the due payments and risk a credit ratings downgrade, and a rejection of (or an astronomical interest rate for) Rwanda's 2015 eurobond issue for $1 billion.
Kagame has also tried to tap into the equity markets, but but Kigali stock market boasts only two companies - Bank of Kigali and brewery company Bralirwa net profit has dramatically gone down during 2013 and is down 29% in 1H 2014 versus last year.
Kagame bankrupting Rwanda and has become a huge liability for the Rwandan people.
Kagame is set to borrow another $22 million this month:
Other details in Kinyarwanda on the new treasury bond issue:

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