Eurobond row worsening Kenya's rating - Rotich

Treasury Cabinet secretary Henry Rotich. Photo/File
Treasury Cabinet secretary Henry Rotich. Photo/File

KENYA will find it difficult getting cheap funds from the international capital markets due to the hullabaloo over Eurobond funds, Treasury Cabinet secretary Henry Rotich has warned.

Reacting to reports that part of the Sh250 billion raised from the sovereign bond is unaccounted for, Rotich said "there has been unfortunate spinning of this story" adding that the Eurobond funds transfer was a "very simple transaction."

"The correct facts are there but the issue is purely because of lack of understanding of how the CBK (Central Bank of Kenya) works. It takes the funds in dollars and disburses it in corresponding Kenya shillings," Rotich told journalists yesterday at a Nairobi hotel.

He said discussions on the Eurobond were damaging investor perception and any new bond issues by the Kenyan government will be charged high rates.

"Investors are very keen, they gather information from outside there and then they process the information in a manner that you may just pay a higher premium for nothing," the CS said.

The government's repayment rate for the current Eurobond is fixed at 6.875 for the 10-year issue and 5.875 per cent for the five-year one. The Eurobond's yield on offer in the secondary market has risen to nearly 10 per cent according to Treasury, placing the bond seller at a disadvantage due to the discount on the initial buying price.

Other than controversy over how much interest the money deposited in the foreign account attracted and what infrastructure projects the money was used for, investigative journalist Sarah Elderkin has queried who the real signatory to the account held at the Federal Reserve Bank of New York is. Rotich yesterday said it was a CBK account.

Last November, the government said the money deposited in the foreign accounts earned only Sh14.9 billion as interest, a figure that analysts including the Institute of Economic Affairs said was too low, raising questions over what rate the state had negotiated.