It was a grim anniversary in Nairobi today. Families laid flowers on the barbed wire barricade that now stands as a monument to last year’s deadly protests. The British High Commission, ever eager to show fiscal largesse with someone else’s money, has offered aid. One wonders if a bit of fiscal discipline might have prevented the crisis altogether.
The market, meanwhile, is doing what markets do: pricing in risk. The Kenyan shilling has been under pressure, and capital flight is a real concern. But let’s not pretend this is just about Kenya. The same forces that drove protesters into the streets – inflation, unemployment, a government that spends without restraint – are at work in the UK. Our own gilt yields are creeping up, a reminder that the bond market does not forgive.
I spoke to a fund manager this morning who summed it up nicely. “The British High Commission’s aid package is a sticking plaster,” he said. “But the real wound is fiscal. Kenya’s debt-to-GDP ratio is over 70% and climbing. Sound familiar?” He had a point. Our own fiscal position is hardly pristine.
The Treasury will point to the OBR’s latest forecasts, but I’ve learned to take those with a pinch of salt. Remember the spring statement? The one that predicted inflation would be 2.5% by now? We’re still above 8%, and the Bank of England is caught between a rock and a hard place.
So as families in Kenya mourn, let’s not kid ourselves. The world is interconnected. A crisis in Nairobi sends ripples through London’s financial district. The barbed wire barricade is a symbol of what happens when governments lose control of the bottom line.
The High Commission’s offer of aid is well-intentioned, I suppose. But what Kenya needs is what every country needs: sound money, low taxes, and a government that knows when to get out of the way. That’s the lesson from the City. It’s a pity our own politicians haven’t learned it yet.
