PUBLIC DEBT

Kenya to borrow Sh50 billion in April as syndicated loan matures

In Summary

• Kenya to float Sh50 billion bond for budgetary support next month

• The government has so far raised Sh220.4 billion in bond issues

Treasury Building
Treasury Building
Image: FILE

Kenya plans to borrow Sh50 billion locally in April to meet its budgetary needs.

The National Treasury will sell 10 and  20 year Treasury Bonds to raise the amount.

The funds could be used to service part of Kenya's maturing international debt.

The government has so far raised Sh220.4 billion in bond issues for the current financial year, 2.7 per cent short of its target of Sh226.6 billion.

On Monday, Central Bank of Kenya said it will receive bids for the two bonds until April 9 and auction them a day later.  It withheld details on interest.

Kenya Revenue Authority is expected to collect Sh1.605 trillion of the country’s 2018/2019 budget that stands at Sh3.01 trillion, with a deficit of Sh562 billion expected to be raised through debts.

Early this month, KRA told Parliamentary Finance Committee that it was is behind revenue collection schedule for the current financial year by Sh55 billion and it might miss its overall target by Sh110 billion.

The low revenue collection is piling  pressure on the National Treasury which has to meet a Sh870.6 billion debt budget for the year.

Next month, Kenya is expected to clear a $800 million (Sh80 billion) syndicated loan it obtained from Standard Chartered, Standard Bank, Citi and Rand MerchantBank in April 2017.

 

The loan was part of Kenya’s planned $1.5 billion (Sh153 billion) syndicated loan partly to plug a fiscal deficit equal to 9.7 percent of gross domestic product in its budget for the 2016-2017 financial year.

Late last year, there was anticipation Kenya was planned to borrow Sh100 billion to settle those loans.

However, Treasury CS Henry Rotich clarified that the government was looking at options of extending the syndicated loan's maturity.

“We are doing a syndicate to term out (lengthen maturity) of a maturing two-year syndicated loan taken in April 2017. This is a standard practice worldwide to retire short-dated loan and replace it with longer-dated loan as part of liability management,’’ Rotich told media.

Calls and messages to various  people at the Treasury to establish if the government still plans to roll over the debt or clear using proceeds from planned bond hit received no response.

The government has since January been issuing at bonds worth Sh40 billion every month.

In January, it issued 15 year Sh40 billion bond which received bids worth 101.9 billion, an oversubscription of 254.7 per cent.

Last month, it issued Sh50 billion five-and 10-year bonds which were also oversubscribed by 156 per cent.

The 25- year infrastructure bond of Sh50 billion issued early last month is however not doing well, with only Sh29.4 billion received  by last Friday.

Kenya is also expected to spend $750 million (Sh76.5. billion) to repay the first tranche of the debut Eurobond bond, which matures in mid-June, attracting an interest of Sh22.95 billion towards interest servicing of the entire facility.