Kenya seeks proposals to issue Sh250 billion Eurobond - source

Treasury CS Henry Rotich and PS Kamau Thugge before the Parliamentary Liaison Committee on April 16 / MONICAH MWANGI
Treasury CS Henry Rotich and PS Kamau Thugge before the Parliamentary Liaison Committee on April 16 / MONICAH MWANGI

Kenya is talking to lenders about a plan to issue a $2.5 billion eurobond denominated either in euros or dollars, a banking source said yesterday.

In the government’s 2018/19 budget approved by parliament in September, Treasury CS Henry Rotich set a net external financing target of 287 billion shillings ($2.83 billion) to partly cover the deficit of Sh562 billion.

“They want to assess whether it would be cheaper to borrow in euros or dollars. A number of banks submitted their interest last week, their technical capabilities,” the source told Reuters.

There has been an increase in government borrowing since President Uhuru Kenyatta came to power in 2013 - a rise that has angered some opposition politicians who say it is saddling future generations with debt.

Heavy investment in infrastructure development has driven the stock of Kenya’s public debt to Sh5.15 trillion comprising Sh2.54 trillion in domestic debt and Sh2.61 trillion external debt as at September last year.

This is a Sh3.26 trillion or 172.49 per cent growth in debt since Sh1.89 trillion recorded in June 2013-the year the Jubilee administration took over the reins of power.

Data by the National Treasury shows the World Bank is Kenya’s largest Institutional and overall lender at $5.8 billion (Sh589.28 billion).

China is the country’s largest bilateral lender at $5.5 billion (Sh558.8 billion) followed by France’s Sh64.8 billion and Japan’s Sh51 billion.

Last year, the government raised Sh202 billion via a sovereign bond which was largely used to retire a syndicated loan of Sh101 billion from a consortium of banks.

The bond was issued in February in two equal tranches of 10 and 30 years for an annual interest rate of 7.25 per cent and 8.25 per cent respectively. They are expected to mature in 2028 and 2048.

The first Eurobond was Sh280 billion borrowed in 2014 in five and 10-year tranches. The first five-year tranche expected to cost tax payers Sh97.71 billion will be paid this year.

In October, Treasury PS Kamau Thugge said government is also planning to raise $370 million (Sh37 billion) in syndicated loans to help cover the budget shortfall of Sh562 billion.

According to the World Bank, Kenya is among 14 sub-Saharan countries that will struggle to pay their loans after 2021.

“Large Eurobond repayments from 2021 could pose significant refinancing risk in the region,” the bank said in its October issue of the African Pulse.

Data by CBK shows Treasury borrowed Sh260 billion from external lenders over nine months to September, a Sh150 billion or 36.59 per cent reduction from Sh410 billion borrowed during the same period last year.

On the other hand, domestic borrowing grew Sh80 billion or 33 per cent to Sh320 billion during the review period compared to Sh240 billion borrowed internally the previous year.

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