KENYA GOES FOR COSTLY EUROBOND TO PAY OFF MATURING $8.5BN DEBTS
NAIROBI - Kenya’s National Treasury is considering tapping into the international capital markets with a fourth Eurobond issue in less than seven years to help pay off part of its debt obligations estimated at Ksh925 billion ($8.48 billion) in the next three months.
This comes against a backdrop of weaker credit rating by global rating agencies pointing out that Kenyan tax payers will have to dig deep into their pockets to service the planned loan.
The three global rating agencies - S&P, Fitch and Moody’s Investor Service - have downgraded the country’s credit status largely due to its faster than expected accumulation of debt against falling revenue collection and staggering economy raising fears of the possibility of a debt distress.
This will mean investors willing to buy the Kenyan bond in the international will demand risk premium to cushion against country’s risk of default.
“All sovereign ratings have been downgraded on account of this Covid-19 pandemic and countries still access the international financial markets. A downgrade does not mean that your access to the market has been limited,” Haron Sirma, the Director-in-charge of
Debt Management at the National Treasury explained in a recent interview.
However, Dr Sirma could not disclose the amount the country will borrow through the Eurobond, stating that the amount would be determined once the parliament considers
and approves the supplementary budget for the current fiscal year (2020/2021).
“You know we are going through the supplementary budget now so may be it is when parliament has considered and approved the supplementary budget that is when we shall start the process (issuing a Eurobond bond),” he said.
Last week S&P downgraded the country’s credit rating to “B” from “B+” citing the significant risks to the government’s fiscal consolidation plan, as external indebtedness remains high.
Last year the agency revised Kenya’s outlook to “negative” from “stable,” citing the adverse impact of the coronavirus pandemic on the weak public finances and gross domestic product growth.
Then, Moody’s changed the country’s outlook to negative from stable reflecting the rising financing risks posed by the huge borrowing needs.
In May 2019, Kenya raised $2.1 billion from international capital markets to pay off other loans including a $750 million Eurobond that matured in June 24, 2019 and other debt obligations.
The bond was issued in two tranches of seven-year tenor and 12-year tenor priced at seven per cent and eight per cent respectively.
In 2014, Kenya issued a $2 billion