Kenya to raise Sh287b from Eurobonds, loans this year

Kenya will offer Eurobonds and seek a syndicated loan to raise the Ksh 287 billion ($2.8 billion) net external financing it planned this fiscal year, Bloomberg reports.

Quoting National Treasury Principal Secretary Kamau Thugge, Bloomberg says the government is planning to raise as much as Ksh 250 billion of Eurobonds in what would be its third sale of the debt. It will also seek about Ksh 37 billion of commercial debt, he said, without giving more details.

The International Monetary Fund estimates Kenya’s total public debt will peak at 63.2% of gross domestic product this year from 58% in 2017. It said last week the higher debt level increased the nation’s fiscal vulnerabilities and places Kenya in the top quartile among its peers.

The Bretton Woods lender urged the state to refinance debt using concessional loans to lengthen maturities in the coming year and limit commercial credit for projects with high social and economic returns.

The Eurobonds plan “could aggravate the negative sentiment on the shilling, coming on the heels of the unfavorable Article IV consultation report by the IMF, which raised concerns about Kenya’s risk of external debt distress,” said Faith Atiti, an economist at Nairobi-based Commercial Bank of Africa, told Bloomberg. “A new Eurobond sale against a backdrop of external debt concerns and rising interest rates in the international debt markets could worsen debt sustainability concerns feeding the recent pressure on the shilling.”

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In addition to the external financing, Kenya’s budget targets domestic borrowing of 271.9 billion shillings to plug a fiscal deficit equal to 5.7% of GDP. Of the Ksh 1.69 trillion revenue goal set for the year through end-June, the Treasury raised Ksh 329.1 billion in the first quarter, according to a gazette notice last week.