Kenya has finally secured its third Eurobond issue, raising $2.1 billion (210 billion Kenyan Shillings), in a dual tranche consisting of 7 and 12 years.
Treasury Cabinet Secretary; Henry Rotich said in a notice on Thursday the 16th of May 2019, that Kenya will pay interest at seven percent for the seven-year tranche and eight percent for the 12-year paper.
He did not however, disclose the split of the debt between the two periods.
The bond was arranged by JPMorgan and Standard Chartered, and will be listed on the London Stock Exchange.
He added that a significant part of the money raised, is expected to go towards refinancing the nation’s maturing debt, with the rest meant to fill part of the budget deficit of 635.5 billion Kenyan Shillings for the 2018/19 fiscal year.
In Thursday’s notice, Mr. Henry Rotich, said; “The proceeds from this issuance will be used to finance some of the development infrastructure projects, the general budgetary expenditure (in accordance with the applicable legal requirements) and to refinance part or all of the obligations outstanding under the $750 million (Sh 75 billion-2014 Eurobond) due on June 24, 2019 and potentially part of the other debt obligations,”.
Kenya’s budget puts the external borrowing for the current fiscal year at 321 billion Kenyan Shillings, part of which had already been met before Wednesday’s Eurobond sale through bilateral loans and syndicated debts.
Kenya sold its debut $2.75 billion (275 billion Kenyan Shillings) bond which was made into two tranches of 5 years (75 billion Kenyan Shillings) and 10 years (2 billion Kenyan Shillings), in June 2014.
In February last year (2018), The Treasury floated its second bond, raising $2 billion (200 billion Kenyan Shillings) in two equal tranches of 100 billion Kenyan Shillings in 10 years and 30 years.
The latest sale is however likely to raise the debate about Kenya’s ballooning public debt again, as well as the cost of servicing the repayment obligations.
Interest payments on both domestic and external debt stand at Sh386 billion in the current fiscal year, rising to Sh426.2 billion in 2019/20.
The country is also expected to raise around 1 trillion Kenyan Shillings, to roll over maturities both domestically and for external loans.
With securing the 210 billion Kenyan Shillings Eurobond however, comes a rather sharp increase in Kenya’s debt pile, as the Treasury races to raise funds for the repayment of yet another international bond floated five years ago.
Treasury Cabinet Secretary Henry Rotich, announced that part of the new debt will be used to retire the 75 billion Kenyan Shillings debut Eurobond floated in 2014.
The Treasury’s low success rate with the trimming of the national budget, has also left it no choice but to borrow a higher amount each year to repay maturing loans.
Kenya’s total public debt is now very well over 5 trillion Kenyan Shillings, as the country has outpaced the rate at which the taxman has been able to raise revenue for the repayment of loans and the financing of the national budget.
The concern over the ability of the East African nation to settle its maturing foreign debts, especially the syndicated loans and Eurobonds whose principal amount is paid in a single instalment on maturity, continues to grow.
