Kenya borrows Sh67bn dual currency loan from foreign banks
The National Treasury Building in Nairobi.
What you need to know:
- The initial round of $200 million (about Sh26.78 billion) should be hitting the state’s coffers before the close of this week.
The government has opted for a dual currency option in the latest $500 million (about Sh67 billion) syndicated loan, thus allowing four foreign lenders to exercise their discretion as to whether to lend to Kenya in either US dollars or Euros.
This is according to two sources familiar with the transaction who told Nation.Africa that the initial tranche of $200 million (about Sh26.78 billion) should be hitting the state’s coffers before the close of this week.
The four lead arrangers of the syndicated loan are Citigroup, Rand Merchant Bank, Standard Bank and Standard Chartered Bank. The facility consists of a three-year tranche with a bullet payment and a five-year tranche that is amortising. Typically, a bullet payment structured loan implies that upon maturity, a lumpsum payment of any outstanding amount will be settled at once by the debtor.
The structuring of the loan in a dual currency manner comes at a time when the government has stepped up efforts, through a six-month long government-to-government petroleum product importation arrangement, to address challenges related to inaccessibility of the US dollar domestically.
According to official data published by the Central Bank of Kenya, the Kenya Shilling has depreciated 8.24 per cent to 133.59 against the US dollar since the start of 2023. Market data, however, shows that commercial banks are still selling the greenback for as high as 138.35.
“The dual currency route is expected to help the economy in both spreading risk from a foreign exchange standpoint as well as help in widening the pool of potential lenders”, said a source familiar with the transaction who is not authorised to speak on the matter.
The pricing of the syndicated loan is set at the Secured Overnight Financing Rate plus five percentage points, implying that the loan attracts about 9.8 per cent interest.
