Kenya raises Sh107 billion in fourth Eurobond

National Treasury CS Ukur Yatani

National Treasury CS Ukur Yatani (holding briefcase) makes his way to Parliament for budget reading on June 11, 2021.

Photo credit: Sila Kiplagat | Nation Media Group

Kenya has borrowed Sh107 billion through its fourth Eurobond issue that was oversubscribed by over five times. 

Announcing the results of the offer, the National Treasury said on Thursday that the successful offer signals robust global investor interest and confidence in the country. 

Treasury said it raised $1 billion (Sh107.7 billion) through issuance of a 12-year Eurobond in the international financial markets. This followed a successful 3-day virtual Eurobond Roadshow. The bond was over-subscribed after it received offers of upto $5.4 billion (Sh581.5 billion) from investors who wanted to buy into the bond.

Treasury Cabinet Secretary Ukur Yatani, who did not give details of the interest rate payable on the loan, said the oversubscription was a sign of strong global investor confidence on Kenya’s economy and medium-term economic prospects. He said it is also a sign that measures being taken to mitigate the effects of the pandemic to the economy were well received by investors. 

“The overwhelming response from global investors reflects the market’s continued confidence in Kenya’s Economic Recovery Programme supported by the IMF and is in line with our Medium-Term Debt Management Strategy approved by Parliament. We want to thank investors for their strong participation in the bond issuance,” he said in a statement. 

The Director-General of the Public Debt Management Office, Dr Harun Sirima, said the government must adopt a cautious approach in contracting commercial borrowing to ensure the country’s debt profile remains within a sustainable path. 

“We went to the market seeking to raise US$ 1 billion and stuck to the discipline of our target amount despite the oversubscription and competitive pricing. Going forward we are optimistic that Kenya will successfully execute liability management operations in the next fiscal year in line with the debt strategy of lowering cost and minimizing risks in the public debt portfolio.”

Debt repayment continues to be a big nightmare for the Kenyan government as it struggles to balance between the expenditure needed to finance the huge infrastructure outlay and also cut down on budget deficits. By March, Kenya’s debt stood at Sh7.3 trillion, which is well above the 60 per cent mark of the GDP. In the new financial year, it plans to borrow Sh929 billion even as it is faced with a Sh1.16 trillion debt-related expenses for the new year. 

The Government of Kenya delegation held a 3-day Virtual Eurobond Roadshow was led the Treasury CS, who was joined by Central Bank of Kenya Governor, Dr. Patrick Njoroge and senior National Treasury officials including Principal Secretary Dr Julius Muia.
They were assisted by representatives from the Joint Lead Managers, Citi and JP Morgan and Co-Lead Managers, NCBA and I&M banks.

Kenya went for its first Eurobond in June 2014 where a total of Sh280 billion was borrowed in five and 10-year tranches. The Eurobond generated controversy after the Treasury was unable to point to projects the bond had financed.

The government went back for another Eurobond in 2018 where it netted Sh202 billion in 10 and 30-year tranches.

In 2019, Kenya was back at the international markets where it raised its Sh210 billion in its third Eurobond named the Kachumbari bond that also repaid other loans and funded unspecified infrastructure projects. 

In coming days, the Treasury is expected to table a request to parliament to increase the current debt ceiling beyond Sh9 trillion to help it borrow the billions it needs to finance the Sh3.6 trillion budget.

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