Investors’ appetite for Eurobond high – Rotich
The CS says the state is monitoring the appropriate time to enter the international capital markets to supplement financing
The National Treasury says it will continue with its plans to borrow money from the international markets to partly fund the Sh691.5 billion deficit in this financial year’s Sh2.2 trillion budget.
The deficit is, however, Sh603.2 billion excluding the Mombasa-Nairobi Standard Gauge Railway, which is fully funded by China.
Cabinet Secretary Henry Rotich yesterday said investors’ interest in the planned country’s second Eurobond issue has been impressive, since the “non-deal” bond roadshow in London in April.
The Treasury, he said, is nonetheless waiting for “the appropriate time” and is not in a rush to test the investors’ appetite.
“We know that investors are eager to continue investing in Kenya, but as you know, we have expanded the options of financing our budget, ranging from domestic borrowing through the T-bills, bonds and other instruments like syndicated loans,” he told reporters on the sidelines of the launch of the Regional Economic Outlook report by the International Monetary Fund.
The country issued its first foreign currency bond in June 2014, and raised $2 billion (about Sh196.9 billion), the largest debut for an African country in the sovereign bond market.
The Eurobond was oversubscribed more than four times at the time, suggesting strong investor appetite.
Proceeds were largely used to finance infrastructural projects, and Sh52.3 billion paid a syndicated loan, according to Treasury documents.
Rotich said the plan in the second issue is to raise cash to bridge the budget deficit in order to allow a public debt management plan to kick off.
“We are monitoring the appropriate time to enter the international capital markets so that we can supplement financing of the budget for this financial year and in the medium term,” he said.
Kenya has been relying on debt to bridge its budget deficit.
This fiscal year, the government plans to borrow about Sh675 billion, including Sh450 billion foreign debt, and Sh225 billion from the domestic market.
By June 2015, total public debt had increased by 20.3 per cent from Sh2.36 trillion in June 2014 to Sh2.84 trillion — 53.1 per cent of the gross domestic product.
That includes a Sh140 billion foreign loan in December 2015 to finance the second phase of SGR.
IMF says the standard stress tests carried on Kenya’s debt do not reveal significant vulnerabilities.