General

The Pain of Riba Based Economy

Sharing is Supporting Islam

President Uhuru’s visit to China on 24 April 2019 caused an uproar in the country following his lobbying for yet another loan of Sh368 Billion from the republic of China. The loan is to finance the extension of the Standard Gauge Railway (SGR) from the Capital Nairobi via Naivasha to Kisumu. In its front page, the Standard Newspaper (Thursday 25 April, 2019) had a headline: Shock report on debt as Uhuru goes for more. The Newspaper contained a report released by Institute of Economic Affairs, which revealed that ordinary Kenyans would be compelled to work for months while they will spend the huge amount of their salaries in repaying the debts. However, china rejected Kenya’s loan request.

SGR, which starts from the Indian Ocean City of Mombasa to Nairobi, is the most expensive project at a cost of US$ 3.6 billion since Kenya attained its ‘independence’. The Government’s key selling point of the SGR project was that it would get the huge trucks off the road. It would also be cheaper and faster. The public was told that it would haul 22 million tons of freight a year. Currently, the volume of transit cargo coming through the port of Mombasa is close to 8 million tons, just about the same capacity as the old railway. The question to pause is the SGR economically viable?

Seeking for another additional loan for an extension of the SGR to the Western Kenya is an indication that the project like any other project in the so – called third world countries was implemented through loans and will definitely ends with debts. In May 2014, the Government entered into a deal to borrow 324 billion loan from China’s Exim Bank to build a 385km modern railway between Mombasa and Nairobi. The loan, whose interest is 3.6 percentage points above the average of London Inter-Bank Offered Rate (Libor) which serves as an international benchmark, to be repaid in three and a half decades (15 years) with a grace period of five years. As Benjamin Franklin quoted ‘creditors have better memories than debtors’ it is clear that Kenyans will continue living on paying debts.

China sees SGR as part of its long-term plan that will add her more economic benefits, bearing in mind that the plan is under the US$1.2 Trillion Belt and Road Initiative which is one its ambitious project looking to encircle the world with it’s diplomatic, financial, commercial and trade tentacles. China is emerging as an economic rival to Western major economies such US and UK, therefore the project is one of the schemes meant to widen its business platform. As to why china refused to offer the loan, this has been definitely attributed to Kenya’s state of indebtedness. Already Kenya owes China Sh.634 Billion. In the current financial year 2018/2019 Kenya is ought to start repaying the loans with interests amounting to Sh870 Billion while its public debts already standing at Sh.5.4 trillion

With political elites within Capitalist regimes, seem not bothering much into common man interests, Kenyan authorities under the veil of development will continue seeking loans knowingly that this will adjacently harm the common destitute who is being milked in taxation.  In economy, the state that Kenya is now facing is known as Public debt overhang defined as the deterioration of the economy due to excessive public debt. This is a true situation that Kenya suffers and more tragically the Government seeks for more loans to repay the other previous loans. This is an indication that capitalist economy is based on debts.

With such a bleak reality, the Government continues with its delusion where its treasury releases statistics showing that economy has recorded a 6.3pc growth! And how can it feel shy yet it has endorsed the flawed capitalist model of economy that has gravely come up with erroneous principles of measuring the growth of economy based on the rise of GDP and not maximizing wealth distribution (goods and services) down to the common citizens. Instead is just to tighten their lives in order to raise revenues for the rich.

It is ignominious for a state to be unable to run its own projects except by relying on loans yet it claims sovereignty and self-governance despite having abundance resources. This state of borrowing is not only witnessed in Kenya but also other nations is not due to the scarcity of resources rather it emanates from lack of strong economic policies on how to use them. Moreover, the present leadership in all African regimes or have no absolute decision nor independent in deciding and benefitting their citizens with those resources. They normally work along with their Western masters in serving the interests of the bunch of capitalists by exploiting and pillaging the country’s resources and thereafter lobbying for loans to back their administration. The fact of the matter is loans are used by the foreign countries as dangerous tools for continuation of economic enslavement across the globe. The Western capitalists laid down the core foundations and institutions such as World Bank and International Monetary Fund (IMF) to have control over the other economies of the world. Through what they call Structural Adjustment which has been in place since 1980, the capitalist impose  strict conditions attached that require debtors to restructure their economies in line with neoliberal policy by cutting subsidies and price controls; privatising public utilities; allowing foreign corporations to buy up public assets, bid on government contracts and repatriate profits at will.

To deal with this monster of borrowing, the world requires a radical change of an economic system that will completely exterminate all forms of usurious and interest backed economy. That change lies within an Islamic economic system, unique economic model that does not allow usury as its economic basis. A system that looks to use resources in theto benefit its citizens. Furthermore, the situation demands a responsible and independent leadership that cannot be dictated and taken hostage by foreign financial institutions. That leadership is the Khilafah established on the method of Prophethood- an independent state whose domestic and foreign policies are free from foreign influence. Indeed it is the Khilafah State that will liberate the whole world from the shackles of    neo-liberal economy and protect mankind from the economic enslavement by the greedy capitalists.

 

Shabani Mwalimu

Media Representative of Hizb ut Tahrir in Kenya