DEBT

Treasury to close Sh60 billion local loan as total debt jumps Sh6 trillion line

While the debt is pilling, the economy is shrinking. Last week, IMF slashed Kenya's 2019/2020 financial year economic growth to 5.6 per cent

In Summary
  • The floating of the bond came just a day after the closure of the Sh30 billion tap sale, which was a dual-tranche 15-year offer that targeted Sh50 billion
  • The new infrastructure bond comes as experts question the sustainability of the country's increasing public debt
Treasury buildings.
Treasury buildings.
Image: MONICAH MWANGI

The National Treasury will today close selling of a 16-year infrastructure bond that sought to raise Sh60 billion from investors.

The bond prospectus published on October 2 by Central Bank of Kenya did not reveal the coupon rate, as it is market-determined.

“The purpose (of the bond) is for funding of infrastructural projects in the 2019/2020 fiscal year budget estimates,” said CBK in the prospectus.

Investors in this bond will start reaping dividends in April next year with 50 per cent redemption of the principal amount set for October 14, 2030 while full redemption will be on October 8, 2035.

The minimum amount for the paper is Sh100,000 while the maximum non-competitive bid is set at Sh20 million.

The floating of the bond came just a day after the closure of the Sh30 billion tap sale, which was a dual-tranche 15-year offer that targeted Sh50 billion.

The new infrastructure bond comes as experts question the sustainability of the country's increasing public debt that effectively crossed the Sh6 trillion mark on July 19, according to CBK’s latest weekly bulletin.

Last week, the International Monetary Fund cautioned that ballooning debt risks in most countries in Sub Saharan Africa with poor ratings risk pushing it into a 'high distress' category.

Last year, IMF downgraded Kenya's debt distress from low to moderate, indicating that the country's risk of defaulting on debt repayments had grown.

The Washington-based lender said the issue of debt is becoming more pressing especially for countries in Africa relying heavily on China to fund development budgets.

"The issue of debt is more pressing in a lot of Sub-Saharan African countries that are either in distress or at high risk of debt distress," IMF's head of Monetary and Capital Markets Evan Papageorgiou said.

The caution came at a time when parliamentary reports indicate the country is lobbying for 44 loan agreements valued at about $4.1 billion (Sh421 billion) with 15 lenders including the African Development Bank, China, Japan, and the World Bank.

While the debt is pilling, the economy is shrinking. Last week, IMF slashed Kenya's 2019/2020 financial year economic growth to 5.6 per cent from the 5.8 per cent figure issued in April, citing global trade wars.

Last week, acting Treasury cabinet secretary and CBK governor Patrick Njoroge joined other finance ministers and heads of apex bank from 189 countries to narrate grim tales of suffering economies at the IMF and World Bank fall meetings in Washington.

‘’As the gathering of 189 member-nations close, the unintended negative impacts of the trade wars were becoming clear. Everybody loses,’’ IMF managing director Kristalina Georgieva said.