Banks con­trol top for­eign debt share

High in­ter­est-bear­ing Eurobond II pushes com­mer­cial load be­yond multi­na­tional lenders’ Sh836.8bn

Business Daily (Kenya) - - FRONT PAGE - Con­stant Munda cmunda@ke.na­tion­media.com

Com­mer­cial loans con­trolled the high­est share of Kenya’s Sh2.51 tril­lion for­eign debt for the pe­riod to March, driven by the $2 bil­lion (Sh201.44 bil­lion) Eurobond the Trea­sury took out in Fe­bru­ary...

The Sh201.44 bil­lion Eurobond has seen Com­mer­cial banks take the largest share of Kenya’s for­eign debt at March, ex­pos­ing tax­pay­ers to costly in­ter­est re­pay­ments.

The lat­est Cen­tral Bank of Kenya (CBK) statis­tics show of ex­ter­nal debt con­tracted from com­mer­cial banks jumped Sh150.3 bil­lion be­tween De­cem­ber 2017 and March.

About Sh858.1 bil­lion, or 34.2 per cent, of Kenya’s for­eign debt was com­mer­cial, the CBK data shows, sur­pass­ing Sh836.8 bil­lion owed to mul­ti­lat­eral lenders such as the World Bank Group.

In­ter­est on com­mer­cial debt is mar­ket de­ter­mined un­like mul­ti­lat­eral and bi­lat­eral loans which come on con­ces­sional terms.

“Kenya’s pro­por­tion of con­ces­sional debt de­clined as a re­sult of in­creased com­mer­cial and semi-con­ces­sional bor­row­ing, mainly driven by the $2.0.bil­lion in­ter­na­tional sov­er­eign bond. Con­se­quently, the share of com­mer­cial debt in­creased by 4.1 per­cent­age points dur­ing the re­view pe­riod,” the CBK says in Quar­terly Eco­nomic Re­view re­port for the pe­riod ended March.

The $1 bil­lion (Sh100.72 bil­lion) 30-year com­po­nent of the Eurobond con­tracted at 8.25 per cent in­ter­est last week traded at an av­er­age of 9.16 per cent on the London Stock Ex­change, while the rate for the 10-year tranche was 8.25 per cent against 7.25 per cent dur­ing the is­sue on Fe­bru­ary 21.

Mul­ti­lat­eral lenders made up 33.3 per cent, or Sh836.8 bil­lion, of the for­eign debt load in March, while bi­lat­eral com­po­nent from coun­tries such as China stood at 31.9 per cent or Sh800.9 bil­lion.

China, Kenya’s largest bi­lat­eral lender, was the sin­gle largest cred­i­tor with $5.3 bil­lion (Sh533.82 bil­lion) loans as at March, higher than $5.2 bil­lion (Sh523.74 bil­lion) in De­cem­ber 2017.

Debt owed to World Bank’s In­ter­na­tional De­vel­op­ment As­so­ci­a­tion stood at $5.1 bil­lion (Sh513.67 bil­lion) in March from $5.0 bil­lion (Sh503.6 bil­lion) three months ear­lier.

Ex­ter­nal debt re­pay­ments obli­ga­tions are pro­jected at Sh364.66 bil­lion this fi­nan­cial year end­ing next June, slightly lower than the Sh394.89 bil­lion, which has been al­lo­cated to de­vel­op­ment projects.

— DIANA NGILA

DEBT Mr Henry Rotich.

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